ENTRUST TECHNOLOGIES INC, S-1/A, 1998-07-24

ENTRUST TECHNOLOGIES INC
S-1/A, 1998-07-24
COMPUTER PROGRAMMING SERVICES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1998

REGISTRATION NO. 333-57275
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------

AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
ENTRUST TECHNOLOGIES INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
MARYLAND 7371 62-1670648
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)

---------------
2323 NORTH CENTRAL EXPRESSWAY
RICHARDSON, TEXAS 75080
(972) 994-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
JOHN A. RYAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ENTRUST TECHNOLOGIES INC.
2323 NORTH CENTRAL EXPRESSWAY
RICHARDSON, TEXAS 75080
(972) 994-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
JOHN A. BURGESS, ESQ. KEITH F. HIGGINS, ESQ.
HALE AND DORR LLP ROPES & GRAY
60 STATE STREET ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02109 BOSTON, MASSACHUSETTS 02110
TELEPHONE: (617) 526-6000 TELEPHONE: (617) 951-7000
TELECOPY: (617) 526-5000 TELECOPY: (617) 951-7050

Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date hereof.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
---------------

CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE (2)
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<S> <C> <C>
Common Stock, $.01 par value per
share................................. $130,026,672 $38,358
</TABLE>

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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.

(2) $33,925 of such fee has been previously paid by the Registrant.
---------------
- -------------------------------------------------------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.

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<PAGE>

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be used
in connection with a United States offering of shares (the "U.S. Prospectus")
and one to be used in connection with a concurrent international offering of
shares (the "International Prospectus"). The U.S. Prospectus and the
International Prospectus are identical except that they contain different
front and back cover pages and different descriptions of the plan of
distribution (contained under the caption "Underwriting" in each of the U.S.
and International Prospectuses). The form of U.S. Prospectus is included
herein and is followed by those pages to be used in the International
Prospectus which differ from, or are in addition to, those in the U.S.
Prospectus. Each of the pages for the International Prospectus included herein
is labeled "Alternate Page for International Prospectus".
<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JULY 24, 1998

7,066,667 SHARES

[ENTRUST TECHNOLOGIES LOGO APPEARS HERE]

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

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Of the 7,066,667 shares of Common Stock offered, 5,653,334 shares are being
offered hereby in the United States and 1,413,333 shares are being offered in a
concurrent international offering outside the United States. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".

Of the 7,066,667 shares of Common Stock offered, 5,400,000 shares are being
sold by the Company and 1,666,667 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders". The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.

Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price per share will be between $14.00 and $16.00. For factors to be considered
in determining the initial public offering price, see "Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT TO
AN INVESTMENT IN THE COMMON STOCK.

Application has been made to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "ENTU".

-----------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

-----------

<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
-------------- ------------ ----------- -------------------
<S> <C> <C> <C> <C>
Per Share.......... $ $ $ $
Total(3)........... $ $ $ $
</TABLE>
- -----
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $900,000 payable by the Company.

(3) The Selling Stockholders have granted the U.S. Underwriters an option for
30 days to purchase up to an additional 848,000 shares at the initial
public offering price per share, less the underwriting discount, solely to
cover over-allotments. Additionally, the Selling Stockholders have granted
the International Underwriters a similar option with respect to an
additional 212,000 shares as part of the concurrent international offering.
If such options are exercised in full, the total initial public offering
price, underwriting discount and proceeds to Selling Stockholders will be
$ , $ and $ , respectively. See "Underwriting".

-----------

The shares offered hereby are offered severally by the U.S. Underwriters, as
specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York on
or about , 1998, against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE

NATIONSBANC MONTGOMERY SECURITIES LLC

WARBURG DILLON READ LLC

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The date of this Prospectus is , 1998.
<PAGE>

[Inside front cover]

On the left half of the page is a circular photo montage showing a globe and
various computer-related images. On the right-hand side of the page is the
caption "Enterprise Security with Real-World PKI Solutions". In the middle of
the page on the left side is the Company's name.

[Inside front cover fold-out, left page]

In the top half of the page is a photograph of the boxed versions of the
Company's Entrust PKI and Entrust Enterprise Desktop Suite Products. The lower
half of the page contains the following text:

Entrust Products

<TABLE>
<S> <C>
ENTRUST/DIRECT (TM)
ENTRUST/AUTHORITY(TM) Provides Entrust automated key
Provides comprehensive and certificate management
Certification Authority and features to secure Web sessions
key recovery capabilities

ENTRUST/EXPRESS(TM)
ENTRUST/ADMIN(TM) Provides security for popular
Performs PKI e-mail applications
administrative tasks

ENTRUST-READY(TM)
ENTRUST/DIRECTORY(TM) NETSCAPE(R) SOLUTION
Scalable directory system for Enables Entrust product
storage of key information features to be used with

Netscape Communicator
ENTRUST/TOOLKIT(TM)

A family of standards-based ENTRUST/ICE(TM) RELEASE 2.0
security APIs Provides security for files

and folders
ENTRUST/COMMERCECA(TM)

Comprehensive security for ENTRUST ENTERPRISE
credit card transactions DESKTOP SUITE(TM)
Provides for a comprehensive
solution for desktop security in
a single software package
</TABLE>

[Inside front cover fold-out, right-hand page]

The following text is in the top half of the page: "The Entrust Public-Key
Infrastructure. The Entrust PKI is an integrated, open and scalable software
framework that operates across multiple platforms, network devices and
applications." In the lower half of the page, a cartoon figure of a computer
with keys next to it is identified by the caption "Entrust PKI". This cartoon
is connected by arrows to four additional cartoon diagrams surrounding it and
labeled as follows: "SET Certs--Credit Card Transactions; Enterprise Certs--E-
mail, Desktop, Remote access, E-forms; Web Certs--E-commerce, Internet banking
and brokerage; VPN certs (expected to become available in late 1998)--Router,
Gateways, Firewalls, Access devices".

CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Company's Consolidated Financial Statements, including the
Notes thereto, appearing elsewhere in this Prospectus. Except as otherwise
noted herein, all information in this Prospectus: (i) reflects the filing upon
the closing of the Offerings of the Company's Amended and Restated Articles of
Incorporation, which redesignates the Company's Series A Common Stock as Common
Stock (the "Common Stock"); (ii) gives effect to the conversion upon the
closing of the Offerings of all outstanding shares of the Company's Series B
Common Stock and Series B Non-Voting Common Stock into an aggregate of
13,063,836 shares of Common Stock; (iii) assumes the issuance of 7,700,000
shares of Common Stock to Northern Telecom Limited upon the surrender of shares
of the Company's Special Voting Stock and the concurrent exchange of
Exchangeable Shares of Entrust Technologies Limited, a majority-owned
subsidiary of the Company (the "Canadian Subsidiary"); (iv) gives effect to a
four-for-one stock split in the form of a stock dividend effected in July 1998;
and (v) assumes no exercise of the Underwriters' over-allotment option. See
"Underwriting". Unless otherwise specified herein, references to the "Company"
or "Entrust" mean Entrust Technologies Inc. and its subsidiaries.

THE COMPANY

Entrust Technologies Inc. ("Entrust" or the "Company") develops, markets and
sells products and services that allow enterprises to manage trusted, secure
electronic communications and transactions over today's advanced networks,
including the Internet, extranets and intranets. The Entrust solution automates
the management of digital certificates, which are similar to electronic
passports, through public key infrastructure ("PKI") technology designed to
assure the privacy and authenticity of internal and external electronic
communications. The Entrust PKI is an integrated, open and scalable software
framework that operates across multiple platforms, network devices and
applications, including e-mail, browsers, electronic commerce, electronic
forms, remote access and other product offerings from leading vendors. The
Company's product suite was first released in 1994, and has since been licensed
for use in global enterprises and government entities such as the Canadian
government, Citibank, the FDIC, J.P. Morgan, NASA, the Republic of Singapore
and the United Kingdom Post. In addition, over three million Entrust
certificates have been issued to date for use by the Company's customers.

The widespread adoption in recent years of public and private networks has
revolutionized the manner in which organizations communicate and conduct
business. These advanced networks provide an attractive medium for
communications and commerce because of their global reach, accessibility, use
of open standards and ability to permit interactions on a real-time basis. At
the same time, they have afforded businesses a user-friendly, low-cost way to
conduct a wide variety of commercial functions electronically. Today,
organizations are increasingly utilizing these networks to access new markets,
improve customer service and streamline business processes through applications
such as e-mail, messaging, remote access, intranet-based applications, on-line
customer support and supply chain applications.

The very openness and accessibility that has stimulated the use of public and
private networks has also driven the need for solutions that address the five
critical network security needs: access control, confidentiality, integrity,
authentication and non-repudiation. To address these needs, enterprises have
increasingly adopted the public key authentication and verification technology
offered by digital certificates. However, the mere issuance of digital
certificates does not ensure that a user's access is properly monitored, that
privileges associated with access are accurately and currently defined, or that
the certificates in question have not been withdrawn or replaced. The
proliferation of users and certificates greatly complicates management of these
issues, which are

3
<PAGE>

critical to maintaining an effective security environment across and between
enterprises. Moreover, unless digital certificates can be easily utilized on a
consistent and reliable basis across multiple applications, organizations face
the challenge and cost of maintaining a separate security infrastructure for
each application, requiring separate keys and certificates, multiple passwords
and inconsistent or incomplete security implementations.

The Company's PKI solution provides highly functional and flexible management
of network security features across an enterprise and between organizations.
The Entrust PKI solution offers enterprises all of the functionality necessary
for full life cycle management of public keys and digital certificates,
including enterprise certificates for use across multiple applications, Web
certificates for secure Web transactions and electronic commerce certificates
for secure credit card transactions. Entrust products can support multiple
applications and large numbers of simultaneous users, while seamlessly
effecting complex certification and key recovery functions, enabling
enterprises to significantly reduce their overall costs for addressing security
requirements.

The Company's objective is to maintain and enhance its position as the
leading provider of comprehensive PKI solutions, building on its four years of
product deployment experience and its 140-person research and development team
that includes researchers with international reputations in their fields. The
Company's marketing strategy is to target Global 2000 organizations and large
government entities that have significant requirements for comprehensive PKI
solutions and the resources to deploy them broadly. The Company also has an
Entrust Partner Program to achieve widespread adoption of its PKI solution.
This program includes VAR and OEM partners that create bundled solutions which
allow customers to purchase total desktop applications incorporating Entrust
functionality. These VAR and OEM partners include Digital Equipment
Corporation, EDS, Hewlett-Packard, IBM and Tandem, which resell the Company's
products with their hardware and networking solutions, as well as Check Point
Software and Symantec, which plan to bundle the Company's PKI solutions with
their own software products. The program also includes consultant and systems
integration partners that recommend and implement Entrust-Ready security
solutions as part of their overall service offerings to customers. These
partners, which include Coopers & Lybrand, Deloitte & Touche and KPMG Peat
Marwick, differentiate their offerings through the inclusion of PKI
functionality to broaden the Company's sales channels. In order to promote the
interoperability of the Company's PKI solution with a wide range of third party
product offerings, the Company has developed relationships with leading
technology providers such as Cisco, Lotus Development. Netscape and Shiva.

The Company was originally established in January 1994 as the Secure Networks
group of Northern Telecom Limited and its subsidiary, Northern Telecom Inc., to
pursue the development and sale of PKI products and services, and was
incorporated as a Maryland corporation in December 1996. The Company's
principal executive offices are located at 2323 North Central Expressway,
Richardson, Texas 75080, and its telephone number at that location is (972)
994-8000.

----------------

Entrust is a registered trademark, and Entrust-Ready, the Entrust design
(Elmer), Entrust/Authority, Entrust/Admin, Entrust/Directory,
Entrust/Entelligence, Entrust/Web Connector, Entrust/CommerceCA, Entrust/Lite,
Entrust/Solo, Entrust/ICE, Entrust/Express, Entrust/Direct, Entrust/True
Delete, Entrust/Toolkit, Entrust PKI, Entrust InSource, Entrust Partner and
Entrust SecureSummit are trademarks or service marks, of Entrust Technologies
Limited, a majority-owned subsidiary of Entrust Technologies Inc. Other
trademarks and service marks used in this Prospectus are the property of their
respective owners.

4
<PAGE>

THE OFFERINGS

The offering of 5,653,334 shares of Common Stock initially being offered in
the United States (the "U.S. Offering") and the concurrent offering of
1,413,333 shares of Common Stock initially being offered outside the United
States (the "International Offering") are collectively referred to herein as
the "Offerings". The closing of the International Offering is conditioned upon
the closing of the U.S. Offering and vice versa. See "Underwriting".

Common Stock offered:

<TABLE>
<S> <C>
By the Company:
U.S. Offering.......................... 4,320,000 shares
International Offering................. 1,080,000 shares
5,400,000
By the Selling Stockholders:
U.S. Offering ......................... 1,333,334 shares
International Offering ................ 333,333 shares
1,666,667
Total ............................... 7,066,667
</TABLE>
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<TABLE>
----------
<S> <C>
Common Stock to be outstanding after the
Offerings............................... 47,643,164 shares(1)
Proposed Nasdaq National Market symbol..... ENTU
Use of proceeds by the Company............. For working capital and other general
corporate purposes, including product
development and potential acquisitions
of complementary businesses, products or
technologies. See "Use of Proceeds".
</TABLE>
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(1) Includes 6,549,480 shares of Special Voting Stock and excludes (i) an
aggregate of 9,587,960 shares of Common Stock reserved for issuance under
the Company's Amended and Restated 1996 Stock Incentive Plan, of which
7,385,764 shares were subject to outstanding options as of June 30, 1998 at
a weighted average exercise price of $2.96 per share, and (ii) an aggregate
of 400,000 shares of Common Stock reserved for issuance under the Company's
1998 Employee Stock Purchase Plan.

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- ----------------
1994 1995 1996 1997 1997 1998
------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
Total revenues.............. $3,881 $ 3,973 $12,802 $25,006 $ 9,891 $20,938
Gross profit................ 2,696 2,989 9,252 20,090 7,551 17,037
Income (loss) from opera-
tions...................... 27 (2,424) 56 (490) (4) (21,765)
Net income (loss)........... 138 (2,123) 387 514 396 (21,388)
Net income (loss) per basic
share(1) .................. $ 0.02 $ 0.01 $ (0.69)
Net income (loss) per di-
luted share(1)............. $ 0.01 $ 0.01 $ (0.69)
Shares used to compute net
income (loss)
per basic share(1)......... 30,700 30,700 30,849
Shares used to compute net
income (loss)
per diluted share(1)....... 41,743 41,064 46,686
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1998
-----------------------
ACTUAL AS ADJUSTED(2)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...... $ 4,369 $78,799
Working capital........................................ 3,138 77,568
Total assets........................................... 24,152 98,582
Shareholders' equity (deficit)......................... (6,733) 84,710
</TABLE>
- -------

(1) See Note 2 of Notes to the Company's Consolidated Financial Statements for
the calculation of basic and diluted net income (loss) per share.

(2) Gives effect to the sale of the 5,400,000 shares of Common Stock offered by
the Company pursuant to the Offerings at an assumed initial public offering
price of $15.00 per share, after deducting the estimated underwriting
discount and offering expenses. See "Use of Proceeds".

5
<PAGE>

RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered by this
Prospectus. This Prospectus contains forward-looking statements that involve
risks and uncertainties. The cautionary statements contained in this
Prospectus should be read as being applicable to all related forward-looking
statements wherever they appear in this Prospectus. The Company's actual
results could differ materially from those discussed here. Important factors
that could cause or contribute to such differences include those discussed
below, as well as those discussed elsewhere in this Prospectus.

POTENTIAL FLUCTUATION AND UNCERTAINTY OF QUARTERLY OPERATING RESULTS

The Company's quarterly revenues and operating results have varied
substantially and may continue to fluctuate due to a number of factors,
including the timing, size and nature of the Company's licensing transactions;
the market acceptance of new products or product enhancements by the Company
or its competitors; product and price competition; the relative proportions of
revenues derived from licenses and services and maintenance; changes in the
Company's operating expenses; personnel changes; foreign currency exchange
rates; and fluctuations in economic and financial market conditions. The
timing, size and nature of individual licensing transactions are important
factors in the Company's quarterly results of operations. Transactions for the
Company's PKI solution often involve large expenditures, and the sales cycles
for these transactions are often lengthy and unpredictable. In addition, the
sales cycle associated with these transactions is subject to a number of
uncertainties, including customers' budgetary constraints, the timing of
customers' budget cycles and customers' internal approval processes. There can
be no assurance that the Company will be successful in closing such large
transactions on a timely basis or at all.

Estimating future revenues is difficult because the Company ships its
products soon after an order is received and as such does not have a
significant backlog. Thus, quarterly license revenues are heavily dependent
upon orders received and shipped within the same quarter. Moreover, the
Company has generally recorded 70% to 80% of its total quarterly revenues in
the third month of the quarter, with a concentration of revenues in the second
half of that month. The Company expects that this concentration of revenues
which is, in part, attributable to the tendency of certain customers to make
significant capital expenditures at the end of a fiscal quarter and to sales
patterns within the software industry, will continue for the foreseeable
future.

The Company's expense levels are based, in significant part, on its
expectations as to future revenues and are largely fixed in the short term. As
a result, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected shortfall in revenues. Accordingly, any
significant shortfall of revenues in relation to the Company's expectations
would have an immediate and material adverse effect on the Company's financial
condition and results of operations for that quarter. In addition, the Company
plans to increase operating expenses to expand its research and development,
managerial, finance, sales and marketing and service and support
organizations. The timing of such expansion and the rate at which new
personnel become productive could cause material fluctuations in quarterly and
annual results of operations.

Due to all of the foregoing factors, the Company believes that period-to-
period comparisons of its results of operations are not necessarily meaningful
and that results in any particular quarter are not necessarily indicative of
future performance. Future revenues and results of operations may vary
substantially from quarter to quarter. In future quarters the Company's
results of operations may be below the expectations of public market analysts
and investors. In either case, the price of the Company's Common Stock could
be materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

6
<PAGE>

LENGTHY SALES CYCLE; DELAYS IN DEPLOYMENT

Implementing the Company's PKI solution is complex and often requires
customers to make significant commitments of time and capital. During a
potential customer's evaluation of available network security products, the
Company spends substantial time, effort and resources educating the customer
about the value of the Company's PKI solution. Sales of the Company's products
require an extensive education and marketing effort throughout a customer's
organization because decisions to acquire such products generally involve a
significant number of customer personnel in various functional and geographic
areas, each having specific and often conflicting requirements. A variety of
factors, including factors over which the Company has little or no control,
may cause potential customers to favor a competing vendor or to delay or
forego a purchase. As a result, the sales cycle for the Company's products is
long, often ranging between six and nine months, and subject to significant
risks, including customers' budgetary constraints and internal acceptance
procedures, over which the Company has little or no control. Due to the
lengthy sales cycle for its products, the Company's ability to forecast the
timing and amount of specific sales is limited, and the delay or failure to
complete one or more large licensing transactions could have a material
adverse effect on the Company's business, financial condition or results of
operations.

Achievement of the Company's financial and other strategic goals is also
dependent upon the broad deployment of its PKI solution within enterprises
once an initial sale has been made. Because the Company's products are
deployed throughout the enterprise, the Company's customers have, from time to
time, and may in the future, delay deployment of the Entrust PKI solution for
a range of reasons, including delays in definition of applicable security
policies and procedures, integration of the solution with other IT components
or initiatives, coordination of the Entrust solution with business
reengineering or other organizational changes and training of systems
administrators and users. Delays in deployment, in turn, may limit the number
of additional customer purchases and discourage the widespread adoption of the
Company's products by other organizations.

RAPID TECHNOLOGICAL CHANGE; NEW PRODUCT AND SERVICE INTRODUCTIONS

The emerging market for network security products and related services is
characterized by rapid technological developments, frequent new product
introductions and evolving industry standards. The emerging nature of this
market and its rapid evolution will require the Company to improve the
performance, features and reliability of its products and services,
particularly in response to competitive offerings, and to be first to market
with new products and services or enhancements to existing products and
services. The success of new product introductions is dependent on several
factors, including proper new product definition and differentiation, timely
completion and introduction of new products, and market acceptance of the
Company's new products and services. The Company may not be successful in
developing and marketing new products and services that respond to competitive
and technological developments and changing customer needs. The failure of the
Company to develop and introduce new products and services successfully on a
timely basis and to achieve market acceptance for such products and services
could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the introduction of new
technologies or advances in techniques for gaining unauthorized network access
could render the Company's existing products obsolete or unmarketable. For
example, any slowdown in the adoption of digital certificates, or the
introduction of any alternative security infrastructures, because of the
introduction of new technologies or otherwise, could have a material adverse
effect on the Company's business, financial condition and long-term prospects.
Advances in techniques by individuals and entities seeking to gain
unauthorized access to networks could expose the Company's existing products
to new and unexpected attacks and require accelerated development of new
products or require the Company to invest resources in products that may not
become profitable. The adoption of new formal standards, or the evolution of
new de facto standards, could require the reconfiguration of the Company's
products, reduce their technical competitiveness or

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impede their adoption and deployment. Failure to counter challenges to current
products or introduce product offerings that keep pace with the technological
changes introduced by competitors or persons seeking to breach information
security could have a material adverse effect on the Company's business,
financial condition or results of operations. See "Business--Products and
Product Development".

COMPETITION

The Company's products are targeted at the new and rapidly evolving market
for PKI solutions. Although the competitive environment in this market has yet
to develop fully, the Company anticipates that it will be intensely
competitive, subject to rapid change and significantly affected by new product
and service introductions and other market activities of industry
participants.

Because of the broad functionality of its PKI solution, the Company competes
with vendors offering a wide range of security products and services. The
Company competes with companies offering commercial certification authority
products and services, such as VeriSign, GTE Cybertrust Solutions, XCert and
IBM in the market for issuing and maintaining digital certificates for use on
public and private networks. Certain of these companies are primarily service
providers rather than software solution vendors. The Company also competes
with companies such as Baltimore Technologies of Ireland, which offer PKI
product solutions for enterprises. In addition, the Company expects to compete
with established companies, such as Security Dynamics and Network Associates,
which have each announced their intention to introduce PKI products that would
be integrated with their other security offerings, as well as Microsoft
Corporation, which has announced its intention to offer a certificate server
product building on its existing security framework in the near future. In
addition, other major networking vendors could, in the future, bundle digital
certificates with their product offerings. The Company also competes with most
major networking device companies and firewall vendors in the emerging market
for providing security across virtual private networks ("VPNs"). The Company
expects that competition from established and emerging companies in the
financial and telecommunications industries will also increase in the near
term, and that certain of the Company's primary long-term competitors may not
yet have entered the market. Increased competition could result in pricing
pressures, reduced margins or the failure of the Company's products and
services to achieve or maintain market acceptance, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Many of the Company's current and potential competitors have longer
operating histories, greater name recognition, larger installed customer bases
and significantly greater financial, technical and marketing resources than
the Company. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements, or to devote
greater resources to the promotion and sale of their products than the
Company. In addition, current and potential competitors have established or
may in the future establish collaborative relationships among themselves or
with third parties, including third parties with whom the Company has
strategic relationships, to increase the ability of their products to address
the security needs of the Company's prospective customers. Accordingly, it is
possible that new competitors or alliances may emerge and rapidly acquire
significant market share. If this were to occur, the Company's business,
financial condition or results of operation could be materially adversely
affected. The Company may also compete for sales of its Entrust products
against its original equipment manufacturer ("OEM") licensees, who resell
Entrust products under their own brand names. The Company contemplates
offering other OEMs licenses to sell Entrust products provided under the
licensee's own brand name and therefore may face further competition for sales
revenues. See "Business--Sales, Marketing and Business Development". The
Company's current and potential competitors may also develop network security
products that are more effective than the Company's current or future products
and the Company's technologies and products may be rendered obsolete by such
developments. See "Business--Competition".

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DEPENDENCE ON LARGE CUSTOMERS

Historically, a limited number of customers has accounted for a significant
percentage of the Company's revenues. In 1995, two customers accounted for 53%
and 18% of revenues, respectively. In 1996, three customers accounted for an
aggregate of 64% of revenues, and 29%, 20% and 15% of revenues, respectively.
In 1997, three customers accounted for 19%, 12% and 11% of revenues,
respectively. The Company anticipates that its results of operations in any
given period will continue to depend to a significant extent upon revenues
from a small number of customers. In addition, the Company anticipates that
such customers will continue to vary over time, so that the achievement of the
Company's long-term goals will require the Company to obtain additional
significant customers on an ongoing basis. The failure of the Company to enter
into a sufficient number of large licensing agreements during a particular
period could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview".

MANAGEMENT OF GROWTH

The Company is currently experiencing rapid growth that is placing a
significant strain on its management and other resources. The Company's
business has grown significantly in size and complexity over the past three
years. Total revenues increased from $4.0 million in 1995 to $25.0 million in
1997. In addition, the number of employees increased from 41 to 248 during the
same period. During 1997, the number of sales and marketing personnel
increased from 23 to 87, and the Company expects to hire additional sales and
marketing and other personnel during 1998. The growth in the size and
complexity of the Company's business as well as its customer base has placed
and is expected to continue to place a significant strain on the Company's
management and operations. In addition, certain of the Company's senior
management have had limited experience in managing publicly traded companies.
The Company anticipates that continued growth, if any, will require it to
recruit and hire a substantial number of new development, managerial, finance,
sales and marketing and support personnel. The Company may not be successful
at hiring or retaining such personnel. The Company's ability to compete
effectively and to manage future growth, if any, will depend on its ability to
continue to implement and improve operational, financial and management
information systems on a timely basis and to expand, train, motivate and
manage its work force. The Company's personnel, systems, procedures and
controls may not be adequate to support its operations. The geographic
dispersal of the Company's operations, including the separation of its
headquarters in Richardson, Texas, from its research and development facility
in Ottawa, Canada, may make it more difficult to manage the Company's growth.

CHALLENGES OF R/3/ INTEGRATION

On June 8, 1998, the Company completed the acquisition of r/3/ Security
Engineering AG ("r/3/"), a company based in Zurich, Switzerland that provides
consulting, applied research and product development services related to
commercial security and encryption solutions. The combination of the two
companies will require, among other things, integration and coordination of
the companies, their respective research and development efforts, and other
business operations. There can be no assurance that such integration will be
accomplished smoothly or successfully. The difficulties of such integration
may also be affected by linguistic and cultural differences, as well as the
necessity of coordinating geographically separated organizations within
differing regulatory environments. The integration of certain operations will
require the dedication of management resources which may temporarily distract
attention from the day-to-day business of the combined company. The inability
of management to successfully integrate the operations of the two companies
could have a material adverse effect on the Company's business, financial
condition and results of operations.

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INDUSTRY REGULATION

The Company's products are subject to export controls under laws of the
U.S., Canada and other countries, and the Company believes that it has
obtained all necessary export approvals. There can be no assurance, however,
that the countries for which exports are restricted, and the regulatory
policies with respect thereto, will not be revised from time to time. The
inability of the Company to obtain required government approvals under these
regulations could materially adversely affect the ability of the Company to
sell products abroad or make products available for sale via international
computer networks such as the Internet. Furthermore, U.S. governmental
controls on the exportation of encryption products and technology may in the
future restrict the ability of the Company to freely export some of its
products with the most powerful information security encryption technology.
The Company is currently authorized under exemptions contained in an interim
U.S. export procedure to export products with encryption technology that is
more powerful than would be permitted in the absence of such authorization or
interim procedure. There can be no assurance that the interim procedure, which
expires on December 31, 1998, will be extended or that, if extended, the
Company will continue to meet the qualifications for exemption thereunder.
Furthermore, there can be no assurance that export versions of the Company's
products will be sought by foreign customers. As a result, foreign competitors
subject to less stringent export controls on their products may be able to
compete more effectively than the Company in the global information security
market. There can be no assurance that these factors will not have a material
adverse effect on the Company's business, financial condition or results of
operations. See "Business--Regulatory Matters".

Due to the increasing popularity of the Internet and other computer
networks, it is possible that laws and regulations may be enacted covering
issues such as user privacy, pricing, content and quality of products and
services. For example, the Telecommunications Act of 1996 prohibits the
transmission over the Internet of certain types of information and content.
The increased attention focused upon these issues as a result of the adoption
of other laws or regulations may reduce the rate of growth of the Internet and
other computer networks, which in turn could result in decreased demand for
the Company's products or could otherwise have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, the imposition of governmental regulations requiring the escrow and
governmental recovery of private encryption keys, as has been proposed from
time to time by various law enforcement agencies within the United States
government, could have a substantial chilling effect on the acceptance and use
of encryption products and public networks for secure communications, which,
in turn, could result in decreased demand for the Company's products or could
otherwise have a material adverse effect on the Company's business, financial
condition and results of operations.

Under the current U.S. government policy, U.S. encryption export controls do
not apply to encryption products which meet all of the following criteria: (i)
are produced and exported from outside of the U.S.; (ii) do not contain U.S.-
origin encryption technologies, unless such technologies are "publicly
available"; (iii) do not contain U.S.-origin encryption source code, unless
such source code is obtained in printed (i.e., "hard copy") form; (iv) are
developed and produced without technical assistance from any U.S. person or
entity; and (v) contain no more than a de minimis amount of U.S.-origin non-
encryption software or technology. The Company believes, and has informed the
U.S. government, that certain of the Company's products are exempt from U.S.
encryption export restrictions under these criteria. The Company, however, has
not obtained any formal U.S. government ruling that any of its products
produced and shipped from outside the U.S. may be exempt from U.S. encryption
export controls, and there can be no assurance that the U.S. government will
refrain from asserting jurisdiction over one or more of the Company's
products. Such a decision by the U.S. government to assert jurisdiction could
result in penalties for past shipments and could restrict future sales of the
Company's products outside the U.S. and Canada, having a

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potentially material adverse effect on the Company's business, financial
condition and results of operations.

COMPETITIVE MARKET FOR TECHNICAL PERSONNEL

The Company's future performance depends, in significant part, upon the
continued service of its key scientific, technical, sales and management
personnel. The loss of the services of one or more of the Company's key
personnel could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not maintain
key person life insurance policies on any of its employees. The Company's
future success also depends on its continuing ability to attract and retain
highly qualified scientific, technical, sales and managerial personnel.
Competition for such personnel is intense, particularly in the field of
cryptography, and there can be no assurance that the Company can retain its
key scientific, technical, sales and managerial employees or that it can
attract, motivate or retain other highly qualified scientific, technical,
sales and managerial personnel in the future. If the Company cannot retain or
is unable to hire such key personnel, the Company's business, financial
condition and results of operations could be materially adversely affected.
See "Business--Employees".

RISKS REGARDING SALES STRATEGY; RELIANCE ON EVOLVING DISTRIBUTION CHANNELS

To sell to its targeted markets, the Company has established, and intends to
expand, a direct sales force. Unless the Company's direct sales force is able
to generate significant additional revenues as it is expanded, the Company's
operating results may be adversely affected while the Company incurs
expenditures in hiring and training additional sales personnel. In addition,
because the Company's products and target market require relatively
experienced sales personnel, the Company may be unable to achieve its sales
goals if it cannot identify and hire sufficient numbers of sales personnel
with requisite industry experience, or train such personnel on a timely basis.

Although direct sales have to date accounted for a majority of the Company's
revenues, the Company has established, and intends to expand, a dedicated
partnership program including technology partners, VARs, OEMs, service
providers, development partners, distributors and other technology, marketing
and sales partners. The Company's relationships with many of these partners
have only been established recently. The Company therefore cannot yet evaluate
the degree to which its partnership programs will facilitate the broad
adoption of its PKI solution or provide alternate marketing and selling
channels for the Company's products. In addition, the Company may not be able
to manage potential conflicts among channel partners effectively, economic
conditions or industry demand may adversely affect these or other indirect
channels and one or more of its partners may devote greater resources to
marketing and supporting the products of other companies.

RISKS ASSOCIATED WITH THE INFORMATION SECURITY MARKET

The market for the Company's PKI solution is at an early stage of
development. A decline in demand for the Company's products, whether as a
result of competition, technology change, the public's perception of the need
for security products, developments in the hardware and software environments
in which these products operate, general economic conditions or other factors,
could have a material adverse effect on the Company's business, financial
condition or results of operations. Continued growth of this market will
depend, in large part, upon the continued expansion of Internet usage and in
the number of organizations adopting or expanding intranets and extranets, the
ability of their respective infrastructures to support an increasing number of
users and services, the public recognition of the potential threat posed by
computer hackers and other unauthorized users and the continued development of
new and improved services for implementation across private and public
networks. If the network systems or complementary products and services are
not developed in a timely manner and, consequently, the market for the
Company's products fails to grow

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<PAGE>

or grows more slowly than the Company currently anticipates, its business,
operating results and financial condition would be materially and adversely
affected.

A well-publicized actual or perceived breach of network or computer security
at one of the Company's customers, regardless of whether such breach is
attributable to the Company's products, could adversely affect the market's
perception of the Company and the Company's products, and could have an
adverse effect on the Company's business, financial condition or results of
operations. In addition, although the effectiveness of the Company's products
is not dependent upon the secrecy of its proprietary technology or licensed
technology, the public disclosure of its proprietary technology could result
in a perception of breached security and reduced effectiveness of the
Company's products, which could have a material adverse effect on the
Company's business, financial condition or results of operations.

Any significant advance in techniques for decoding or "cracking" encrypted
information could render some or all of the Company's existing products
obsolete or unmarketable. The Company's PKI solution depends in part on the
application of certain mathematical principles. The security afforded by the
Company's encryption technology is predicated on the assumption that
"factoring" of the composite of large prime numbers is difficult. If an "easy
factoring" method is developed, the security afforded by the Company's
encryption technology would be reduced or eliminated. There can be no
assurance that such a development will not occur. Moreover, even if no
breakthrough in factoring is discovered, factoring problems can theoretically
be solved by computer systems having sufficient speed and power. If such
improved techniques for decrypting encrypted information are developed or
rendered possible by the increased availability of powerful computing
resources, a material adverse effect on the Company's business, financial
condition and results of operations could result.

RISKS OF ERROR OR FAILURES

Products as complex as those offered by the Company may contain undetected
errors, failures or bugs when first introduced or when new versions are
released; such errors and failures may be detected at any point during the
product life cycle. Many companies offering software products have in the past
discovered failures and bugs in certain of their product offerings and have
experienced delays or lost revenues during the period required to correct
these errors. The computer technology environment is characterized by a wide
variety of standard and non-standard configurations that make pre-release
testing for programming or compatibility errors very difficult and time-
consuming, especially with the many configurations and variations of equipment
and operating systems in computer networks. Furthermore, despite testing by
the Company and by others, products may contain errors, failures or bugs that
are discovered only after commencement of commercial shipments by the Company.
Errors, failure or bugs in the Company's products could result in adverse
publicity, product returns, loss of or delay in market acceptance of the
Company's products or claims by the customer or others against the Company.
Alleviating such problems could require the Company to make significant
expenditures of capital and resources and could cause interruptions, delays or
cessation of service to the Company's customers. The Company attempts to limit
its liability to customers, including liability arising from a failure of the
security features contained in the Company's products, through contractual
limitations of warranties and remedies. However, some courts have held similar
contractual limitations of liability, or the "shrink-wrap licenses" in which
they sometimes are embodied, to be unenforceable. Accordingly, there can be no
assurance that such limitations will be enforced. The Company does not
currently carry product liability insurance. The processes and methodologies
used by computer hackers to access or sabotage networks and intranets are
rapidly evolving and are generally not recognized until launched against one
or more systems. Therefore, the Company, in most cases, is unable to
anticipate the methodologies or tactics of hackers prior to their
implementation. Any compromise of the security offered by the Company's
products, in a single incident or a series of incidents, could have a material
adverse effect on its business, operating results and financial condition. The
publicity surrounding any security breaches

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could adversely affect the public perception of the security offered by the
Company's PKI solution, which in turn could also have a material adverse
effect on its business, financial condition and results of operations.

INTERNATIONAL SALES RISKS

Although the Company has had limited sales outside of the U.S. and Canada,
the Company expects to increase its sales in international markets. In order
to expand international sales, the Company must establish additional foreign
operations, hire additional personnel and establish relationships with
additional partners. This expansion will require significant management
attention and financial resources and could have a material adverse effect on
the Company's business, financial condition and results of operations. In
addition, there can be no assurance that the Company will be able to maintain
or increase international market demand for the Company's products and
services. Although the Company's international sales are primarily denominated
in U.S. dollars, the Company has significant payroll and other obligations
that are denominated in Canadian dollars, and expects to incur an increasing
percentage of obligations denominated in foreign currencies. A change in the
value of the U.S. dollar relative to foreign currencies could make the
Company's products more expensive and, therefore, potentially less competitive
in those markets and could otherwise adversely affect the Company's ability to
meet its foreign-currency-denominated obligations. Currently, the Company does
not employ currency hedging strategies to reduce this risk. In addition, the
Company's international business may be subject to a variety of risks,
including difficulties in collecting international accounts receivable or
obtaining U.S. export licenses, potentially longer payment cycles, increased
costs associated with maintaining international marketing efforts, the
introduction of non-tariff barriers and higher duty rates and difficulties in
enforcement of contractual obligations and intellectual property rights. There
can be no assurance that such factors will not have a material adverse effect
on the Company's future international sales and, consequently, on the
Company's business, financial condition or results of operations.

LIMITED PROTECTION OF PROPRIETARY RIGHTS AND DEPENDENCE ON LICENSED RIGHTS

The Company relies on a combination of patent, trade secret, copyright and
trademark laws, non-disclosure agreements and contractual provisions to
establish and protect its proprietary rights. The Company also uses a printed
"shrink-wrap" license for users of its products in order to protect certain of
its copyrights and trade secrets. The Company attempts to protect its trade
secrets and other proprietary information through agreements with suppliers,
non-disclosure and non-competition agreements with employees and consultants
and other security measures.

There can be no assurance that the Company will seek patents on aspects of
its technology relating to its information security products, that any such
patents will be issued or that any such additional patents will be
sufficiently broad to protect the Company's technology relating to its
information security products. The status of computer-related patents involves
complex legal and factual questions and the breadth of claims allowed is
uncertain. Accordingly, there can be no assurance that patent applications
filed by the Company will result in patents being issued or that its existing
patents, and any patents that may be issued to it in the future, will afford
protection against competitors with similar technology, nor can there be any
assurance that patents issued to the Company will not be infringed upon or
designed around by others or that others will not obtain patents that the
Company would need to license or design around. If existing or future patents
containing broad claims are upheld by the courts, the holders of such patents
might be in a position to require the Company to obtain licenses to continue
to use such technology. There can be no assurance that any such licenses that
might be required for the Company's products would be available on reasonable
terms, if at all.

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<PAGE>

The Company relies on outside licensors, including RSA Data Security, Inc.
("RSA"), for patent and/or software license rights in encryption technology
that is incorporated into and is necessary for the operation of the Company's
products. The Company's success will depend in part on its continued ability
to have access to such technologies that are or may become important to the
functionality of its products. See "Business--Intellectual Property" and
"Certain Transactions". Any inability to continue to procure or use such
technology on terms similar to existing licenses could have a material adverse
effect on the Company's business, financial condition and results of
operations.

Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or
to obtain and use information that the Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, such piracy can be expected to be a persistent problem,
particularly in international markets and as a result of the growing use of
the Internet. Some courts have held that shrink-wrap licenses, because they
are not signed by the licensee, are not enforceable. The Company's trade
secrets or confidentiality agreements may not provide meaningful protection of
the Company's proprietary information. Furthermore, there can be no assurance
that others will not independently develop similar technologies or duplicate
any technology developed by the Company or that the Company's technology will
not infringe upon patents of other rights owned by others. The Company's
inability to protect its proprietary rights could have a material adverse
effect on the Company's business, financial condition or results of
operations. Further, the Company may be subject to additional risk as it
enters into transactions in countries where intellectual property laws are not
well developed or are poorly enforced. Legal protections of the Company's
rights may be ineffective in such countries, and technology developed in such
countries may not be protectable in jurisdictions where protection is
ordinarily available.

Any claims or litigation, with or without merit, to defend or enforce the
Company's intellectual property could be costly and could result in a
diversion of management's attention, which could have a material adverse
effect on the Company's business, financial condition or results of
operations. Adverse determinations in such claims or litigation could also
have a material adverse effect on the Company's business, financial condition
or results of operations.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. Although the Company believes that its products and systems are
Year 2000 compliant, the Company utilizes third-party equipment and software
that may not be Year 2000 compliant. Failure of such third-party equipment or
software to be Year 2000 compliant could require the Company to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on the Company's business, financial condition and results of
operations. Furthermore, the purchasing patterns of customers or potential
customers may be affected by Year 2000 issues as companies expend significant
resources to correct their current systems for Year 2000 compliance. These
expenditures may result in reduced funds being available to implement the
infrastructure

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<PAGE>

needed to conduct trusted and secure communications and commerce over public
and private networks or to purchase products and services such as those
offered by the Company, which could have a material adverse effect on the
Company's business, financial condition and results of operations.

BENEFITS OF THE OFFERINGS TO CURRENT STOCKHOLDERS

After the Offerings, it is expected that a public market will exist for the
Common Stock. At an initial public offering price of $15.00 per share, there
will be a substantial increase in the market value of the Common Stock held by
the Company's current stockholders over their original purchase price.
Following the closing of the Offerings, such stockholders will hold an
aggregate of 40,576,497 shares of Common Stock (39,516,497 shares if the
Underwriters' over-allotment option is exercised in full). In addition, the
Selling Stockholders are selling an aggregate of 1,666,667 shares of Common
Stock in the Offerings (2,726,667 shares if the Underwriters' over-allotment
option is exercised in full), resulting in aggregate proceeds to the Selling
Stockholders of approximately $25.0 million (approximately $40.9 million if
the Underwriter's over-allotment option is exercised in full). See "Dilution",
"Management" and "Principal and Selling Stockholders".

CONCENTRATION OF OWNERSHIP; CONFLICTS OF INTEREST

Upon completion of the Offerings, Northern Telecom Limited ("NTL") and its
subsidiary, Northern Telecom Inc. ("NTI", and, together with NTL and its
affiliates, "Nortel") will beneficially own approximately 56.4% of the
Company's outstanding Common Stock, and three of the Company's five directors,
David D. Archibald, F. William Conner and Frank A. Dunn, will be
representatives of Nortel. Accordingly, Nortel will continue to have the
ability to exert significant control over the Company's affairs, including
without limitation control over the election of the Company's directors and
control over the Company's strategic and operating activities. This
concentration of ownership and Board representation may have the effect of
delaying or preventing a change in control of the Company. In addition, under
a strategic alliance agreement NTL and the Company entered in 1996 (the
"Strategic Alliance Agreement"), NTL may restrict the Company, for so long as
NTL maintains beneficial ownership of a majority of the voting power of the
Company, from any act which may reasonably be anticipated to contravene any
material instrument binding on NTL, any order of any governmental body which
has jurisdiction over NTL or any of its assets, or any applicable law or
regulation. See "Management", "Principal and Selling Stockholders" and
"Certain Transactions".

Conflicts of interest may arise between the Company and Nortel in a number
of areas relating to their past and ongoing relationships. Under the Strategic
Alliance Agreement, the Company has granted to NTL for three years, or for as
long as the Company is controlled by NTL, whichever is longer, the right to
distribute Entrust products on terms no less favorable to NTL than the terms
of the agreements then in effect with other resellers of the Company's
products. The Company also granted to NTL a royalty-bearing license to use and
modify the Company's source code in NTL products on terms no less favorable to
NTL than those offered to other source code licensees. Although NTL has
informed the Company that it does not currently intend to compete against the
Company, there are no contractual or other restrictions on NTL's ability to
engage in competitive activities.

The directors of the Company who are officers of Nortel may also have
conflicts of interest with respect to matters potentially or actually
affecting both companies, such as acquisitions, financings and other corporate
opportunities that may be suitable for either one. To the extent that these
opportunities arise, the directors must consider such factors as whether the
opportunity is presented to the directors in their capacities as directors of
the Company, whether the opportunity is within the Company's line of business
consistent with its strategic objectives and whether the Company would be able
to undertake or benefit from such opportunity. There can be no assurance that
conflicts will be resolved in favor of the Company.

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BROAD DISCRETION AS TO USE OF PROCEEDS

The Company intends to use the net proceeds, as determined by management in
its sole discretion, for working capital and general corporate purposes,
including product development and the possible acquisition of additional
businesses and technologies that are complementary to the current or future
business of the Company. The Company has not determined the specific
allocation of the net proceeds among the various uses described above and,
accordingly, investors in the Offerings will rely upon the judgment of the
Company's management with respect to the use of proceeds. See "Use of
Proceeds".

NO PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offerings, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will
develop or be sustained after the Offerings or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined by negotiations among the
Company and the Representatives of the Underwriters. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. The trading price of the Common Stock is likely to be highly
volatile and may be significantly and adversely affected by factors such as
actual or anticipated fluctuations in the Company's operating results,
announcements of technological innovations, new products or new contracts by
the Company or its competitors, developments with respect to patents,
copyrights or propriety rights, conditions and trends in the software
industry, changes in financial estimates by securities analysts, general
market conditions and other factors. The public equity markets have from time
to time experienced significant price and volume fluctuations that have
particularly affected the market prices for the stock of technology companies
as a group but have been unrelated to the performance of particular companies.
These broad market fluctuations, as well as shortfalls in sales or earnings as
compared with securities analysts' expectations, changes in such analysts'
recommendations or projections and general economic and market conditions, may
materially and adversely affect the market price of the Common Stock. See
"Underwriting".

DIVIDENDS

No cash dividends have been paid on the Common Stock to date, and the
Company does not anticipate paying dividends in the foreseeable future. See
"Dividend Policy".

DILUTION

Purchasers of shares of Common Stock in the Offerings will suffer an
immediate and substantial dilution in the net tangible book value of the
Common Stock from the initial public offering price. In addition, if the
average closing price of the Company's Common Stock for the first 10 trading
days following the Company's initial public offering (the "Market Price") is
less than $12.08, then the Company will be required to pay the former r/3/
shareholders the difference between the Market Price and $12.08 on their
1,167,288 shares of Common Stock. The Company has the option to make this
payment in cash or shares of Common Stock, and, if the Market Price is
substantially less than $12.08, the payment would further dilute new investors
in the Offerings. See "Dilution" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of substantial amounts of shares of Common Stock in the public market
following the Offerings could adversely affect the market price of the Common
Stock. All of the Company's directors, officers and stockholders, as well as
all holders of options to purchase Common Stock, have agreed, pursuant to
lock-up agreements with the Representatives of the Underwriters or, in the
case of the option holders, pursuant to stock option agreements with the
Company (collectively, the

16
<PAGE>

"Lock-Up Agreements"), not to offer, sell, contract to sell or otherwise
dispose of their shares of Common Stock for 180 days after the date of the
Prospectus. Goldman, Sachs & Co. may release all or any part of the shares
subject to the Lock-Up Agreements at any time in its sole discretion and
without notice. Upon expiration of such 180-day period, in addition to the
shares of Common Stock offered hereby (and assuming no exercise of outstanding
options), approximately 39,397,169 additional shares of Common Stock will be
available for sale in the public market in accordance with Rules 144 or 701
under the Securities Act of 1933, as amended (the "Securities Act"). Promptly
following the consummation of the Offerings, the Company intends to register
an aggregate of 9,987,960 shares of Common Stock issuable under its stock
plans. The Company is unable to predict the effect that sales made under Rule
144, or otherwise, may have on the then prevailing market price of the Common
Stock. Following the Offerings, the holders of approximately 39,397,169 shares
of Common Stock are entitled to certain piggyback and demand registration
rights with respect to such shares. By exercising their registration rights,
such holders could cause a large number of shares to be registered and sold in
the public market. Sales pursuant to Rule 144 or other exemptions from
registration, or pursuant to registration rights, may have an adverse effect
on the market price for the Common Stock and could impair the Company's
ability to raise capital through an offering of its equity securities. See
"Description of Capital Stock", "Shares Eligible for Future Sale" and
"Underwriting".

POTENTIAL ADVERSE EFFECT OF ANTI-TAKEOVER PROVISIONS; POSSIBLE ISSUANCE OF
PREFERRED STOCK

The Company's Articles of Incorporation and Bylaws contain provisions,
including a staggered board of directors, that may make it more difficult for
a third party to acquire, or may discourage acquisition bids for, the Company.
These provisions could limit the price that certain investors might be willing
to pay for shares of the Common Stock and could make it more difficult for a
third party to acquire, or could discourage a third party from acquiring, a
majority of the outstanding voting stock of the Company. See "Description of
Capital Stock". The Company's Board of Directors also has the authority to
issue up to 5,000,000 shares of preferred stock, $.01 par value per share
("Preferred Stock"), and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
any further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. See
"Description of Capital Stock--Preferred Stock". The issuance of Preferred
Stock could make it more difficult for a third party to acquire, or may
discourage a third party from acquiring, a majority of the outstanding voting
stock of the Company.

17
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered by the Company pursuant to the Offerings are estimated to be
$74,430,000 after deducting the estimated underwriting discount and offering
expenses and assuming an initial public offering price of $15.00 per share.
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Stockholders hereunder. See "Principal and Selling
Stockholders".

The principal purposes of the Offerings are to establish a public market for
the Common Stock, to facilitate future access by the Company to public equity
markets and to obtain additional working capital.

The Company intends to use the net proceeds of the Offerings for working
capital and other general corporate purposes, including product development.
The Company may also use a portion of the net proceeds of the Offerings to
fund acquisitions of complementary businesses, products or technologies,
although there are currently no commitments or agreements with respect to any
such acquisitions. See "Risk Factors--Broad Discretion as to Use of Proceeds".
Pending such use, the Company intends to invest the net proceeds of the
Offerings in short-term, investment grade, interest-bearing securities.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its shares of
Common Stock. The Company currently intends to retain all of its earnings, if
any, to finance future growth and therefore does not anticipate paying cash
dividends in the foreseeable future. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources".

18
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company as of June
30, 1998 (i) on an actual basis, (ii) on a pro forma basis as described in
Note 2 below, and (iii) as further adjusted reflecting the issuance and sale
of the 5,400,000 shares of Common Stock offered hereby by the Company pursuant
to the Offerings, at an assumed initial public offering price of $15.00 per
share and after deducting the estimated underwriting discount and offering
expenses. See "Use of Proceeds". The capitalization information set forth in
the table below is qualified by reference to the Company's Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------------------------
PRO FORMA
ACTUAL(1) PRO FORMA(2) AS ADJUSTED(2)
--------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt (including current portion
of long-term debt)...................... $ 30 $ 30 $ 30
------- ------- -------
Redeemable Series A common stock(3)...... 17,013 -- --
------- ------- -------
Shareholders' equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized, no shares
issued or outstanding (actual); no
shares issued or outstanding (pro forma
and pro forma as adjusted)............. -- -- --
Common stock, $.01 par value; no shares
authorized, issued or outstanding
(actual); 100,000,000 shares authorized
(pro forma and pro forma as adjusted);
35,693,684 shares issued and
outstanding (pro forma);
41,093,684 shares issued and
outstanding (pro forma as
adjusted)(4)........................... -- 357 411
Series A common stock, $.01 par value;
100,000,000 shares authorized;
20,312,040 shares issued and
outstanding (actual); no shares
authorized, issued or outstanding (pro
forma and pro forma as adjusted)....... 203 -- --
Series B common stock, $.01 par value;
260,000 shares authorized; 221,052
shares issued and outstanding (actual);
no shares authorized, issued or
outstanding (pro forma and pro forma as
adjusted).............................. 2 -- --
Series B non-voting common stock, $.01
par value; 260,000 shares authorized;
38,948 shares issued and outstanding
(actual); no shares authorized, issued
or outstanding (pro forma and pro forma
as adjusted)........................... -- -- --
Special voting stock, $.01 par value;
15,000,000 shares authorized; 7,700,000
shares issued and outstanding (actual);
6,549,480 shares issued and outstanding
(pro forma and pro forma as adjusted).. 77 65 65
Additional paid-in capital............... 15,770 32,643 107,019
Accumulated other comprehensive income
(loss).................................. (48) (48) (48)
Accumulated deficit...................... (22,737) (22,737) (22,737)
------- ------- -------
Total shareholders' equity (deficit)..... (6,733) 10,280 84,710
------- ------- -------
Total capitalization..................... $10,310 $10,310 $84,740
======= ======= =======
</TABLE>
- --------
(1) Assumes (i) the filing in July 1998 of Articles of Amendment to the
Company's Articles of Incorporation increasing the authorized number of
shares of Preferred Stock, Series A Common Stock and Special Voting Stock
and (ii) the Company's four-for-one stock split in the form of a stock
dividend, effective as of July 1998.

(2) Gives effect to (i) the conversion of all outstanding shares of the
Company's Series B Common Stock and Series B Non-Voting Common Stock into
an aggregate of 13,063,836 shares of Common Stock upon the closing of the
Offerings, (ii) the expiration of the repurchase rights of the Redeemable
Series A Common Stock upon the closing of the Offerings, (iii) the
issuance of an aggregate of 1,150,520 shares of Common Stock upon the
surrender of a like number of shares of the Company's Special Voting Stock
and the concurrent exchange of a like number of shares of Exchangeable
Shares of Entrust Technologies Limited by NTL upon the closing of the
Offerings, and (iv) the filing upon the closing of the Offerings of the
Company's Amended and Restated Articles of Incorporation eliminating the
Company's Series B Common Stock and Series B Non-Voting Common Stock,
redesignating the Company's Series A Common Stock as Common Stock and
authorizing 100,000,000 shares of Common Stock.

(3) The holders of the Redeemable Series A Common Stock are entitled to the
same rights and privileges as the Series A Common Stock, except for
additional special provisions as described in Note 12 of Notes to the
Company's Consolidated Financial Statements. At June 30, 1998, there were
1,167,288 shares of Redeemable Series A Common Stock issued and
outstanding.

(4) Excludes (i) an aggregate of 9,587,960 shares of Common Stock reserved for
issuance under the Company's Amended and Restated 1996 Stock Incentive
Plan, of which 7,385,764 shares were subject to outstanding options as of
June 30, 1998 at a weighted average exercise price of $2.96 per share, and
(ii) an aggregate of 400,000 shares of Common Stock reserved for issuance
under the Company's 1998 Employee Stock Purchase Plan, which Plan will not
become effective until the closing of the Offerings. See "Management--
Stock Plans" and Note 8 of Notes to the Company's Consolidated Financial
Statements.

19
<PAGE>

DILUTION

The pro forma net tangible book value of the Company as of June 30, 1998 was
$6.7 million, or $0.16 per share of Common Stock. Pro forma net tangible book
value per share is determined by dividing the Company's tangible net worth
(tangible assets less liabilities) by the number of shares of Common Stock
outstanding, after giving effect to the expiration of the repurchase rights of
the Redeemable Series A Common Stock, the conversion of the Company's Series B
Common Stock and Series B Non-Voting Common Stock into an aggregate of
13,063,836 shares of Common Stock upon the closing of the Offerings and
assuming the issuance of 7,700,000 shares of Common Stock to NTL upon the
surrender of shares of the Company's Special Voting Stock and the concurrent
exchange of Exchangeable Shares of the Canadian Subsidiary. After giving
effect to the sale of the shares of Common Stock offered by the Company
pursuant to the Offerings at an assumed initial public offering price of
$15.00 per share and after deducting the estimated underwriting discount and
offering expenses, the pro forma net tangible book value of the Company as of
June 30, 1998 would have been $81.1 million, or $1.70 per share. This
represents an immediate increase in such pro forma net tangible book value of
$1.54 per share to existing stockholders and an immediate dilution of $13.30
per share to new investors purchasing shares in the Offerings. If the initial
public offering price is higher or lower, the dilution to the new investors
will be greater or less, respectively. The following table illustrates the per
share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $15.00
Pro forma net tangible book value per share prior to the
Offerings................................................... $0.16
Increase per share attributable to the Offerings............. 1.54
Pro forma net tangible book value per share after the Offer-
ings.......................................................... 1.70
------
Dilution per share to new investors............................ $13.30
======
</TABLE>

The following table summarizes, as of June 30, 1998, the total number of
shares of Common Stock purchased from the Company, the total consideration
paid and the average consideration paid per share by the existing stockholders
and by the new investors based (for new investors) upon an assumed initial
public offering price of $15.00 per share (before deducting the estimated
underwriting discount and offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------
AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)
........................ 42,243,164 88.7% $35,054,233 30.2% $ 2.44
New investors (1) ....... 5,400,000 11.3 81,000,000 69.8 $15.00
---------- ----- ----------- -----
Total.................. 47,643,164 100.0% $16,054,233 100.0%
========== ===== =========== =====
</TABLE>
- --------

(1) The net effect of sales by the Selling Stockholders in the Offerings will
be to reduce the number of shares held by existing stockholders to
40,576,497 shares, or 85.2% of the total number of shares of Common Stock
outstanding after the Offerings (or 39,516,497 shares and 82.9% if the
Underwriters' over-allotment option is exercised in full), and to increase
the number of shares held by new investors to 7,066,667 shares, or 14.8%
of the total number of shares of Common Stock outstanding after the
Offerings ( or 8,126,667 shares and 17.1% if the Underwriters' over-
allotment option is exercised in full).

As of June 30, 1998, there were also outstanding options to purchase an
additional 7,385,764 shares of Common Stock at a weighted average exercise
price of $2.96 per share. To the extent the foregoing options are exercised,
there will be further dilution to new investors in the pro forma net tangible
book value of their shares. See "Capitalization", "Management--Amended and
Restated 1996 Stock Incentive Plan" and Note 8 of Notes to the Company's
Consolidated Financial Statements.

20
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below for the years ended
December 31, 1995, 1996 and 1997 and at December 31, 1996 and 1997 are derived
from the Company's Consolidated Financial Statements, which appear elsewhere
in this Prospectus, and which have been audited by Deloitte & Touche Chartered
Accountants. The selected consolidated financial data set forth below for the
year ended December 31, 1994 and as of December 31, 1994 and 1995 are derived
from the Company's audited financial statements, which are not included in
this Prospectus. The selected consolidated financial data for the six months
ended June 30, 1997 and 1998 and as of June 30, 1998 are derived from
unaudited financial statements of the Company which appear elsewhere in this
Prospectus. Consolidated financial data is unavailable for periods prior to
1994, because the Company had no revenues and did not exist as a separate
business unit. In the opinion of management, the unaudited financial
statements have been prepared on a basis consistent with the Company's
Consolidated Financial Statements and include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair presentation of the
Company's results of operations for those periods. The operating results for
the six months ended June 30, 1998 are not necessarily indicative of the
results to be expected for the full year ending December 31, 1998. The data
set forth below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Company's Consolidated Financial Statements and Notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------ --------------
1994 1995 1996 1997 1997 1998
------ ------- ------ ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
Revenues:
License................... $1,194 $ 1,845 $8,689 $16,486 $ 5,677 $ 15,845
Services and maintenance.. 2,687 2,128 4,113 8,520 4,214 5,093
------ ------- ------ ------- ------- --------
Total revenues.......... 3,881 3,973 12,802 25,006 9,891 20,938
------ ------- ------ ------- ------- --------
Cost of revenues:
License................... 6 34 393 502 229 812
Services and maintenance.. 1,179 950 3,157 4,414 2,111 3,089
------ ------- ------ ------- ------- --------
Total cost of revenues.. 1,185 984 3,550 4,916 2,340 3,901
------ ------- ------ ------- ------- --------
Gross profit............... 2,696 2,989 9,252 20,090 7,551 17,037
------ ------- ------ ------- ------- --------
Operating expenses:
Sales and marketing....... 1,083 1,914 3,858 11,193 3,999 10,982
Research and development.. 898 2,287 2,874 5,692 2,077 5,346
General and administra-
tive..................... 688 1,212 2,464 3,695 1,479 2,266
Acquired in-process re-
search and development... -- -- -- -- -- 20,208
------ ------- ------ ------- ------- --------
Total operating ex-
penses................. 2,669 5,413 9,196 20,580 7,555 38,802
------ ------- ------ ------- ------- --------
Income (loss) from opera-
tions..................... 27 (2,424) 56 (490) (4) (21,765)
Interest income............ -- -- -- 723 415 217
------ ------- ------ ------- ------- --------
Income (loss) before (pro-
vision) benefit for income
taxes..................... 27 (2,424) 56 233 411 (21,548)
(Provision) benefit for in-
come taxes................ 111 301 331 281 (15) 160
------ ------- ------ ------- ------- --------
Net income (loss).......... $ 138 $(2,123) $ 387 $ 514 $ 396 $(21,388)
====== ======= ====== ======= ======= ========
Net income (loss) per basic
share(1).................. $ 0.02 $ 0.01 $ (0.69)
Net income (loss) per di-
luted share(1)............ $ 0.01 $ 0.01 $ (0.69)
Shares used in basic per
share computation(1)...... 30,700 30,700 30,849
Shares used in diluted per
share computation(1)...... 41,743 41,064 46,686
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ JUNE 30,
1994 1995 1996 1997 1998
------ ------ ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.......................... $ -- $ -- $ -- $12,638 $4,369
Working capital (deficit)............. 1,831 1,016 (1,186) 13,707 3,138
Total assets.......................... 2,231 2,190 3,687 24,757 24,152
Shareholders' equity (deficit)........ 2,095 1,672 (60) 14,662 (6,733)
</TABLE>
- -------
(1) See Note 2 of Notes to the Company's Consolidated Financial Statements for
the calculation of basic and diluted net income per share.

21
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company develops, markets and sells products and services that allow
enterprises to manage trusted, secure electronic communications and
transactions over today's advanced networks, including the Internet, extranets
and intranets. The Entrust solution automates the management of digital
certificates, which are similar to electronic passports, through PKI
technology designed to assure the privacy and authenticity of internal and
external electronic communications. The Entrust PKI is an integrated, open and
scalable software framework that operates across multiple platforms, network
devices and applications, including e-mail, browsers, electronic commerce,
electronic forms, remote access and other product offerings from leading
vendors.

The Company was originally established in January 1994 as the Secure
Networks group of NTL and its subsidiary, NTI, to pursue the development and
sale of PKI products. During December 1996, Nortel restructured its Secure
Networks group by incorporating Entrust Technologies Inc. in Maryland and
Entrust Technologies Limited in Ontario, Canada. The assets and business of
the Secure Networks group within NTI and NTL were then transferred to Entrust
Technologies Inc. and Entrust Technologies Limited, respectively. As a result
of the restructuring and concurrent private placement described below, Entrust
Technologies Inc. became a majority-owned subsidiary of NTI, and Entrust
Technologies Limited became a majority-owned subsidiary of Entrust
Technologies Inc., with NTL possessing a minority interest in such subsidiary.
The Company's revenues consist of license revenues and services and
maintenance revenues. License revenues consist of fees for the license of the
Company's products; services revenues consist of fees for consulting and
training and maintenance revenues are fees for post-contract support
("maintenance"). The Company's revenues have increased from $4.0 million in
1995 to $25.0 million in 1997, and from $9.9 million for the six months ended
June 30, 1997 to $20.9 million for the six months ended June 30, 1998.

The Company generates revenues primarily from licensing the rights to its
software products to enterprise customers and from sublicense fees from
resellers. In October 1997, the American Institute of Certified Public
Accountants issued a Statement of Position ("SOP") No. 97-2, "Software Revenue
Recognition", which the Company adopted, effective January 1, 1998, which has
had no effect on the Company's method of recognizing revenues. Prior to 1997,
the Company's revenue recognition policy was in accordance with the provisions
of the previous authoritative guidance provided by SOP 91-1, "Software Revenue
Recognition".

Revenues from perpetual software license agreements are recognized as
revenues upon receipt of an executed license agreement (or an unconditional
order under an existing license agreement), and shipment of the software, if
there are no significant remaining vendor obligations and collection of the
receivable is probable.

Consulting and training revenues are generally recognized as the services
are performed. Consulting services are typically performed under separate
service agreements and are usually performed on a time and material basis.
Such services primarily consist of implementation services related to the
installation and deployment of the Company's products and do not include
significant customization or development of the underlying software code.

Revenues from maintenance are recognized ratably over the term of the
maintenance period, which is typically one year. If maintenance services are
included free of charge or discounted in a license agreement, such amounts are
unbundled from the license fee at their fair market value based upon the value
established by independent sales of such maintenance to customers.

22
<PAGE>

In any period a significant portion of the Company's revenues may be derived
from large sales to a limited number of customers. In 1995, two customers
accounted for 53% and 18% of revenues, respectively. In 1996, three customers
accounted for an aggregate of 64% of revenues, and 29%, 20% and 15% of
revenues, respectively. In 1997, three customers accounted for 19%, 12% and
11% of revenues, respectively. The customer that accounted for 29% of 1996
revenues accounted for 19% of 1997 revenues. See "Risk Factors--Dependence on
Large Customers".

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain
consolidated statement of operations data expressed as a percentage of
revenues:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DA-
TA:
Revenues:
License.................. 46.4% 67.9% 65.9% 57.4% 75.7%
Services and mainte-
nance................... 53.6 32.1 34.1 42.6 24.3
------- ------- ------- ------- --------
Total revenues......... 100.0 100.0 100.0 100.0 100.0
------- ------- ------- ------- --------
Cost of revenues:
License.................. 0.9 3.0 2.0 2.3 3.9
Services and mainte-
nance................... 23.9 24.7 17.7 21.3 14.7
------- ------- ------- ------- --------
Total cost of reve-
nues.................. 24.8 27.7 19.7 23.6 18.6
------- ------- ------- ------- --------
Gross profit............... 75.2 72.3 80.3 76.4 81.4
------- ------- ------- ------- --------
Operating expenses:
Sales and marketing...... 48.2 30.1 44.8 40.4 52.5
Research and develop-
ment.................... 57.6 22.4 22.7 21.0 25.5
General and administra-
tive.................... 30.5 19.3 14.7 15.0 10.8
Acquired in-process re-
search and
development............. -- -- -- -- 96.5
------- ------- ------- ------- --------
Total operating ex-
penses................ 136.3 71.8 82.2 76.4 185.3
------- ------- ------- ------- --------
Income (loss) from opera-
tions..................... (61.1) 0.5 (1.9) -- (103.9)
Interest income............ -- -- 2.9 4.2 1.0
------- ------- ------- ------- --------
Income (loss) before (pro-
vision) benefit for income
taxes..................... (61.1) 0.5 1.0 4.2 (102.9)
(Provision) benefit for in-
come taxes................ 7.6 2.5 1.1 (0.2) 0.8
------- ------- ------- ------- --------
Net income (loss).......... (53.5)% 3.0% 2.1% 4.0% (102.1)%
======= ======= ======= ======= ========
</TABLE>

SIX MONTHS ENDED JUNE 30, 1997 AND 1998

REVENUES

Total revenues increased 112% from $9.9 million for the six months ended
June 30, 1997 to $20.9 million for the six months ended June 30, 1998.
Revenues derived from sales outside North America, primarily Europe and Japan,
accounted for 6% and 18% of total revenues for the six months ended June 30,
1997 and 1998, respectively. The Company plans to expand its international
operations by hiring additional personnel, recruiting international resellers
and establishing additional operations abroad, and, accordingly, the Company
anticipates that international revenues will increase in absolute dollars and
as a percentage of total revenues during 1998.

LICENSE REVENUES. License revenues increased 179% from $5.7 million for the
six months ended June 30, 1997 to $15.8 million for the six months ended June
30, 1998, representing 57%

23
<PAGE>

and 76% of total revenues in the respective periods. The increase in license
revenues in absolute dollars was primarily attributable to increased market
awareness and acceptance of the Company's products, continued enhancement and
development of the Company's product offerings and increased sales and
marketing activities. The increase in license revenues as a percentage of
total revenues reflected the Company's continued focus on the product side of
its business and the increased use of third-party consulting firms and systems
integrators to provide implementation services to its customers.

SERVICES AND MAINTENANCE REVENUES. Services and maintenance revenues
increased 21% from $4.2 million for the six months ended June 30, 1997 to $5.1
million for the six months ended June 30, 1998, representing 43% and 24% of
total revenues in the respective periods. The increase in services and
maintenance revenues was primarily the result of an increase in demand for
consulting services and customer support and, to a lesser extent, training
services associated with increased sales of the Company's applications. The
higher percentage of services and maintenance revenues as a percentage of
total revenues for the six months ended June 30, 1997 was related to higher
levels of revenues associated with a significant custom development software
agreement with the Canadian government and two system integration arrangements
in which the Company provided turnkey solutions that included system hardware
components in addition to software installation and implementation services.
Services and maintenance revenues for the six months ended June 30, 1998 did
not include revenues from such turnkey arrangements and included a lesser
amount of revenues related to the custom development agreement with the
Canadian government than was recorded for the same period in 1997.

COST OF REVENUES

COST OF LICENSE REVENUES. Cost of license revenues consists primarily of
costs associated with product media, documentation, packaging and royalties to
third-party software vendors. Cost of license revenues increased from $229,000
for the six months ended June 30, 1997 to $812,000 for the six months ended
June 30, 1998, representing 4% and 5% of license revenues for the respective
periods.

COST OF SERVICES AND MAINTENANCE REVENUES. Cost of services and maintenance
revenues consists primarily of personnel costs associated with customer
support, training and consulting services, as well as costs paid to third-
party consulting firms for those services. Cost of services and maintenance
revenues increased from $2.1 million for the six months ended June 30, 1997 to
$3.1 million for the six months ended June 30, 1998, representing 21% and 15%
of total revenues for the respective periods. The increase in absolute dollars
reflected the increased costs associated with the higher levels of services
and maintenance revenues during the six months ended June 30, 1998. The higher
percentage of cost of services and maintenance revenues as a percentage of
total revenues for the six months ended June 30, 1997 reflected the cost of
the system hardware components related to the system integration arrangements
described above. The Company does not anticipate any arrangements in the
future that would include such hardware components as part of the solution
provided to its customers.

OPERATING EXPENSES

SALES AND MARKETING. Sales and marketing expenses consist primarily of
personnel costs associated with the selling and marketing of the Company's
products, including salaries, commissions and travel and entertainment. Such
expenses also include the cost of advertising, trade shows and marketing and
promotional materials. Sales and marketing expenses increased from $4.0
million for the six months ended June 30, 1997 to $11.0 million for the six
months ended June 30, 1998, representing 40% and 53% of total revenues in the
respective periods. The increase in sales and marketing expenses in absolute
dollars and as a percentage of revenues reflected the Company's

24
<PAGE>

continued focus on increasing direct sales and marketing expenditures to
address certain international and vertical markets. In addition, the Company
increased the number of employees in sales, marketing and business development
from 49 at June 30, 1997 to 133 at June 30, 1998. The Company also launched a
new seminar series and participated in a major trade show during the six
months ended June 30, 1998. The Company is in the process of significantly
expanding its direct sales force in North America and Europe and anticipates
that sales and marketing expenses will increase in absolute dollars.

RESEARCH AND DEVELOPMENT. Research and development expenses include software
development costs and consist primarily of personnel costs associated with the
Company's engineers, cryptographers and contractors. Research and development
expenses increased from $2.1 million for the six months ended June 30, 1997 to
$5.3 million for the six months ended June 30, 1998, representing 21% and 26%
of total revenues for the respective periods. The increase in research and
development expenses in absolute dollars and as a percentage of total revenues
was primarily the result of increased staffing and the associated support cost
of software engineers, cryptographers and contractors in connection with the
expansion and enhancement of the Company's product line and for quality
assurance and testing. The Company believes that it must continue to invest in
research and development in order to maintain its technological leadership
position and, accordingly, expects research and development expenses to
continue to increase in absolute dollars as it hires additional experienced
security experts and software engineers.

In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise
Marketed, the Company has evaluated the establishment of technological
feasibility of its various products during the development phase. The time
period during which costs could be capitalized from the point of reaching
technological feasibility, which has been defined as development of a beta
model, until the time of general product release is very short, and,
consequently, the amounts that could be capitalized are not material to the
Company's financial position or results of operations. Therefore, the Company
charges all product development expenses to operations in the period incurred.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of personnel costs related to management, accounting and human
resources, and the associated overhead costs. General and administrative
expenses increased from $1.5 million for the six months ended June 30, 1997 to
$2.3 million for the six months ended June 30, 1998, representing 15% and 11%
of total revenues in the respective periods. This increase in absolute dollars
was primarily due to increased staffing and related expenditures required to
enhance the infrastructure to support the Company's growth.

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. On June 8, 1998, the Company
completed the acquisition of r/3/, a company based in Zurich, Switzerland that
provides consulting, applied research and product development services related
to commercial security and encryption solutions. Pursuant to the Share
Purchase Agreements dated May 30, 1998, entered into between the Company and
the shareholders of r/3/, the Company agreed to acquire all the outstanding
shares of r/3/ in exchange for an aggregate of 1,167,288 shares of the
Company's Common Stock and cash consideration of approximately $4.4 million.
In the event the Common Stock is not listed on a national securities market or
exchange within one year after the closing of the acquisition, the r/3/
shareholders have the right to require the Company to repurchase the Common
Stock at $14.58 per share. Additionally, if the average closing price of the
Company's Common Stock for the first 10 trading days following the Company's
initial public offering (the "Market Price") is less than $12.08, then the
Company will be required to pay the difference between the Market Price and
$12.08 to the r/3/ shareholders in cash or in additional stock. This
acquisition was recorded under the

25
<PAGE>

purchase method of accounting, and, therefore, the results of operations of
r/3/ and the fair value of the acquired assets and liabilities are included in
the Company's financial statements beginning on the acquisition date. Upon
consummation of the acquisition, r/3/ became a wholly owned subsidiary of the
Company.

In connection with the acquisition, the Company obtained an appraisal of the
intangible assets, which resulted in $20.2 million of the purchase price being
allocated to in-process research and development that has not yet reached
technological feasibility and has no alternative future use, which was
expensed in the six months ended June 30, 1998.

The value assigned to purchased in-process technology was determined by
identifying research and development projects in areas for which technological
feasibility has not yet been established. This relates primarily to the
completion of a suite of encryption and security applications (the "r3
Suite"). The value was determined by estimating the costs to develop the
purchased in-process technology into commercially viable products, estimating
the resulting net cash flows from such projects and discounting the net cash
flows back to their present value.

The nature of the efforts to develop the purchased in-process technology
into commercially viable products relate to the completion of all planning,
designing, prototyping, security testing and verification activities that are
necessary to ensure that the r3 Suite is produced to meet design
specifications, including functions, features and technical performance
requirements. The efforts to develop the purchased in-process technology also
include verifying the technology's compatibility and interoperability with
other applications. The estimated cost for completion of this activity through
the year 2001 is approximately $12.0 million, although by its nature such
estimate is subject to change, given the uncertainties of the development
process.

The estimated total revenues for the r3 Suite begin in 1999 and peak in
2002, and decline rapidly after 2003 as other new products are expected to
enter the market. These forecasts are based on management's estimates of
market size and growth, expected trends in technology (such as new encryption
and security algorithms) and the nature and expected timing of new product
introductions. Net cash flows are discounted to the present value at venture
capital rates of return. Because of the rapid growth in the forecast and the
high risks associated with the developmental projects, such a discount rate
was utilized for the acquired business enterprise and the in-process projects.
If these projects are not successfully developed, the sales and profitability
of the Company could be adversely affected in future periods. Additionally,
the value of the other intangible assets acquired may become impaired.

INTEREST INCOME

Interest income of $415,000 and $217,000 for the six months ended June 30,
1997 and 1998, respectively, reflected investment income earned on the
proceeds from the Company's private placement of Series B Common Stock in
January 1997. The decrease in investment income for the six months ended June
30, 1998 as compared to the same period in 1997 reflected a reduction of
interest earned during the period as a result of lower amounts of cash, cash
equivalents and short-term investments in 1998 compared to 1997.

PROVISION FOR INCOME TAXES

The Company recorded a provision for income taxes of $15,000 for the six
months ended June 30, 1997 and a benefit of $160,000 for the six months ended
June 30, 1998. Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards No. 109. The effective income tax rate differed
from the statutory income tax rate in both periods primarily due to the impact
of the Canadian research and development tax credits claimed.

26
<PAGE>

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

REVENUES

Total revenues increased 222% from $4.0 million in 1995 to $12.8 million in
1996 and increased 95% from $12.8 million in 1996 to $25.0 million in 1997.
Revenues derived from sales outside North America, primarily Europe, accounted
for less than 1% of total revenues in 1995 and 4% and 5% of total revenues in
1996 and 1997, respectively.

LICENSE REVENUES. License revenues increased from $1.8 million in 1995 to
$8.7 million in 1996 and $16.5 million in 1997, representing 46%, 68% and 66%
of total revenues in the respective periods. The increase in license revenues
in absolute dollars was primarily attributable to increased market awareness
and acceptance of the Company's products, continued enhancement and
development of the Company's product offerings and increased sales and
marketing activities.

SERVICES AND MAINTENANCE REVENUES. Services and maintenance revenues
increased from $2.1 million in 1995 to $4.1 million in 1996 and $8.5 million
in 1997, representing 54%, 32% and 34% of total revenues in the respective
periods. The increase in services and maintenance revenues in absolute dollars
was primarily the result of an increase in demand for consulting and systems
implementation services from customers purchasing the Company's products for
enterprise-wide implementations, and an increase in maintenance revenues from
a larger installed product base. Services and maintenance revenues in 1996 and
1997 included revenues from a significant custom development software
agreement with the Canadian government, which is being recognized on the
percentage-of-completion basis through 1999. The Company did not enter into
any significant custom development software arrangements during 1997 and does
not expect such arrangements to be significant to services and maintenance
revenues in the future. As the Company continues to implement its strategy of
encouraging third-party organizations such as systems integrators to become
proficient in implementing the Company's products, consulting revenues as a
percentage of services and maintenance revenues may decrease.

COST OF REVENUES

COST OF LICENSE REVENUES. Cost of license revenues increased from $34,000 in
1995 to $393,000 in 1996 and $502,000 in 1997, representing 2%, 5% and 3% of
license revenues in the respective periods.

COST OF SERVICE AND MAINTENANCE REVENUES. Cost of services and maintenance
revenues increased from $950,000 in 1995 to $3.2 million in 1996 and $4.4
million in 1997, representing 45%, 77% and 52% of services and maintenance
revenues in the respective periods. The increase in cost of services and
maintenance revenues as a percentage of services and maintenance revenues in
1996 resulted primarily from several system integration arrangements in which
the Company provided customers with turnkey solutions that included system
hardware components in addition to software installation and implementation
services. The Company does not anticipate any arrangements in the future that
would include such hardware components as part of the solution provided to its
customers.

OPERATING EXPENSES

SALES AND MARKETING. Sales and marketing expenses increased from $1.9
million in 1995 to $3.9 million in 1996 and $11.2 million in 1997,
representing 48%, 30% and 45% of total revenues in the respective periods. The
increase in absolute dollars was primarily related to the expansion of the
Company's sales and marketing resources, increased commission expenses as a
result of higher sales levels and increased marketing activities, including
trade show, direct mail and other promotional expenses.

RESEARCH AND DEVELOPMENT. Research and development expenses increased from
$2.3 million in 1995 to $2.9 million in 1996 and $5.7 million in 1997. As a
percentage of total revenues, research

27
<PAGE>

and development expenses were 58%, 22% and 23%, in 1995, 1996 and 1997,
respectively. The increase in research and development expenses in absolute
dollars was primarily the result of increased staffing and associated support
costs of software engineers, cryptographers and contractors in connection with
the expansion and enhancement of the Company's product line and for quality
assurance and testing.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
from $1.2 million in fiscal 1995 to $2.5 million in 1996 and $3.7 million in
1997, representing 31%, 19% and 15% of total revenues in the respective
periods. The increase in general and administrative expense in absolute
dollars was primarily due to increased staffing and related expenditures
required to enhance the infrastructure to support the Company's growth.

INTEREST INCOME

Interest income of $723,000 in 1997 reflected investment income earned on
the proceeds from the Company's private placement of Series B Common Stock in
January 1997.

PROVISION FOR INCOME TAXES

The Company recorded income tax benefits of $301,000 in 1995 and $331,000 in
1996 and recorded a provision for income taxes of $281,000 for 1997. Income
taxes are accounted for in accordance with Statement of Financial Accounting
Standards No. 109. The effective income tax rates differed from the statutory
income tax rates primarily due to the impact of the Canadian research and
development tax credits claimed.

SELECTED QUARTERLY OPERATING RESULTS

The Company's quarterly operating results have varied substantially in the
past and are likely to vary substantially from quarter to quarter in the
future due to a variety of factors. Estimating future revenues is difficult
because the Company ships its products soon after an order is received and as
such does not have a significant backlog. Thus, quarterly license revenues are
heavily dependent upon orders received and shipped within the same quarter.
Moreover, the Company has generally recorded 70% to 80% of its total quarterly
revenues in the third month of the quarter, with a concentration of revenues
in the second half of that month. This concentration of revenues is, in part,
attributable to the tendency of certain customers to make significant capital
expenditures at the end of a fiscal quarter and to sales patterns within the
software industry. The Company expects these revenue patterns to continue for
the foreseeable future. In addition, quarterly license revenues are dependent
on the timing of revenue recognition, which can be affected by many factors,
including the timing of customer installations and the fulfillment of
acceptance criteria. In this regard, the Company has from time to time
experienced delays in recognizing revenues with respect to certain orders.
Despite the uncertainties in its revenue patterns, the Company's operating
expenses are based upon anticipated revenue levels and such expenses are
incurred on an approximately ratable basis throughout the quarter. As a
result, if expected revenues are deferred or otherwise not realized in a
quarter for any reason, the Company's business, operating results and
financial condition would be materially adversely affected.

The following tables set forth the Company's statement of operations data
for each of the six quarters in the period ended June 30, 1998, as well as the
percentage of the Company's total revenues represented by each item. This
unaudited quarterly information has been prepared on the same basis as the
annual information presented elsewhere in this Prospectus and, in management's
opinion, reflects all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the information for the
quarters presented. This information should be read in conjunction with the
Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. The operating results for any quarter are not
necessarily indicative of results for any future period.

28
<PAGE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1997 1997 1998 1998
-------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
License................ $2,632 $3,045 $4,949 $5,860 $7,681 $ 8,164
Services and mainte-
nance................. 1,471 2,743 2,137 2,169 2,243 2,850
------ ------ ------ ------ ------ --------
Total revenues....... 4,103 5,788 7,086 8,029 9,924 11,014
------ ------ ------ ------ ------ --------
Cost of revenues:
License................ 104 125 131 142 342 470
Services and mainte-
nance................. 628 1,483 1,174 1,129 1,476 1,613
------ ------ ------ ------ ------ --------
Total cost of reve-
nues................ 732 1,608 1,305 1,271 1,818 2,083
------ ------ ------ ------ ------ --------
Gross profit............ 3,371 4,180 5,781 6,758 8,106 8,931
------ ------ ------ ------ ------ --------
Operating expenses:
Sales and marketing.... 1,698 2,301 3,528 3,666 4,931 6,051
Research and develop-
ment.................. 952 1,125 1,700 1,915 2,283 3,063
General and administra-
tive.................. 686 793 1,026 1,190 1,063 1,203
Acquired in-process re-
search
and development....... -- -- -- -- -- 20,208
------ ------ ------ ------ ------ --------
Total operating ex-
penses.............. 3,336 4,219 6,254 6,771 8,277 30,525
------ ------ ------ ------ ------ --------
Income (loss) from oper-
ations................. 35 (39) (473) (13) (171) (21,594)
Interest income......... 209 206 164 144 146 71
------ ------ ------ ------ ------ --------
Income (loss) before
(provision) benefit for
income taxes........... 244 167 (309) 131 (25) (21,523)
(Provision) benefit for
income taxes........... (20) 5 226 70 160 --
------ ------ ------ ------ ------ --------
Net income (loss)....... $ 224 $ 172 $ (83) $ 201 $ 135 $(21,523)
====== ====== ====== ====== ====== ========
Net income (loss) per
share
Basic.................. $ 0.01 $ 0.01 $ -- $ 0.01 $ -- $ (0.69)
====== ====== ====== ====== ====== ========
Diluted................ $ 0.01 $ -- $ -- $ -- $ -- $ (0.69)
====== ====== ====== ====== ====== ========
Shares used in per share
computation
Basic.................. 30,700 30,700 30,700 30,700 30,700 30,997
====== ====== ====== ====== ====== ========
Diluted................ 41,064 41,064 41,869 41,908 45,231 46,919
====== ====== ====== ====== ====== ========
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1997 1997 1997 1997 1998 1998
-------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
License................ 64.1% 52.6% 69.8% 73.0% 77.4% 74.1%
Services and mainte-
nance................. 35.9 47.4 30.2 27.0 22.6 25.9
------ ------ ------ ------ ------ --------
Total revenues....... 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ --------
Cost of revenues:
License................ 2.5 2.2 1.8 1.8 3.4 4.3
Services and mainte-
nance................. 15.3 25.6 16.6 14.0 14.9 14.6
------ ------ ------ ------ ------ --------
Total cost of reve-
nues................ 17.8 27.8 18.4 15.8 18.3 18.9
------ ------ ------ ------ ------ --------
Gross profit............ 82.2 72.2 81.6 84.2 81.7 81.1
------ ------ ------ ------ ------ --------
Operating expenses:
Sales and marketing.... 41.4 39.8 49.8 45.7 49.7 54.9
Research and develop-
ment.................. 23.2 19.4 24.0 23.9 23.0 27.8
General and administra-
tive.................. 16.7 13.7 14.5 14.8 10.7 10.9
Acquired in-process re-
search
and development....... -- -- -- -- -- 183.5
------ ------ ------ ------ ------ --------
Total operating ex-
penses.............. 81.3 72.9 88.3 84.4 83.4 277.1
------ ------ ------ ------ ------ --------
Income (loss) from oper-
ations................. 0.9 (0.7) (6.7) (0.2) (1.7) *
Interest income......... 5.1 3.6 2.3 1.8 1.5 0.6
------ ------ ------ ------ ------ --------
Income (loss) before
(provision) benefit for
income taxes........... 6.0 2.9 (4.4) 1.6 (0.2) *
(Provision) benefit for
income taxes........... (0.5) 0.1 3.2 0.9 1.6 *
------ ------ ------ ------ ------ --------
Net income (loss)....... 5.5% 3.0% (1.2)% 2.5% 1.4% *
====== ====== ====== ====== ====== ========
</TABLE>
- --------

*Not meaningful

29
<PAGE>

License revenues have increased in each of the six quarters in the period
ended June 30, 1998. As a result of the increased acceptance of the Company's
product offerings and expansion of the Company's sales and marketing efforts
during the past six quarters, license revenues as a percentage of total
revenues increased from 70% for the quarter ended September 30, 1997 to 73%
and 74% for the quarters ended December 31, 1997 and June 30, 1998,
respectively. Cost of license revenues varies from period to period primarily
due to the amount of royalties payable by the Company to third-party software
suppliers. Services and maintenance revenues have decreased as a percentage of
total revenues since the quarter ended March 31, 1997, except for the higher
percentage in the quarters ended June 30, 1997 and 1998. Services and
maintenance revenues for the quarter ended June 30, 1997 included revenues
from the hardware components of two system integration projects, which
contributed to the increase in services and maintenance revenues in absolute
dollars and as a percentage of total revenues compared to the other three-
month periods. Services and maintenance revenues for the six months ended June
30, 1998 increased as a percentage of total revenues from 23% in the first
three months of 1998 to 26% in the second three months of 1998. This increase
reflected an increase in maintenance renewals from the Company's increasing
customer base. Cost of services and maintenance revenues has been comparable
for all periods other than the quarter ended June 30, 1997, which included the
higher costs of the hardware components previously discussed. The increase in
operating expenses in absolute dollars from $7.6 million for the six months
ended June 30, 1997 to $38.8 million for the six months ended June 30, 1998
reflected the Company's expenses of $20.2 million for in-process research and
development and investment in growing the organization. The number of
employees has increased each quarter for the last six quarters and such
increases are expected to continue for the foreseeable future.

The Company intends to continue to increase its research and development
expenditures in order to pursue its strategy of maintaining technological
leadership in the PKI market. The Company also intends to increase sales and
marketing expenditures significantly as it expands its domestic and
international sales and marketing staff and develops indirect sales and
distribution channels. In addition, general and administrative expenses have
increased each quarter since the quarter ended March 31, 1997 as the Company
invested in the infrastructure needed to support its growing operations.
Accordingly, to the extent that continued increases in such expenses are not
accompanied by increased revenues, the Company's operating results and
financial condition may be materially adversely affected.

LIQUIDITY AND CAPITAL RESOURCES

The Company operated as a division of Nortel from its inception in 1994
until December 1996, when it was separately incorporated as part of the
financing described below. See Note 1 of Notes to the Company's Consolidated
Financial Statements. As such, all of the Company's investing and financing
activities were handled through Nortel's centrally managed treasury function.
Therefore, the Company did not maintain separate cash balances until December
31, 1996. At the close of business on December 31, 1996, Nortel transferred to
the Company certain assets, liabilities, intellectual property rights,
licenses and contracts of the Secure Networks group of Nortel. In exchange,
Nortel received 20,300,000 shares of the Company's Common Stock and 7,700,000
shares of the Company's Special Voting Stock. See "Certain Transactions". In
January 1997, the Company issued an aggregate of 260,000 shares of its Series
B Common Stock and Series B Non-Voting Common Stock in a private placement for
an aggregate consideration of $24.0 million, net of the costs and expenses of
the private placement. The Company used approximately $8.0 million of the net
proceeds of the private placement to repay certain intercompany debt.

The Company used cash of $1.2 million and $2.1 million for operating
activities in 1995 and 1997 and generated cash of $2.8 million from operating
activities in 1996. The use of cash in 1995 was primarily a result of the net
loss for the period of $2.1 million, offset in part by a decrease in accounts
receivable and an increase in accounts payable. In 1997, the $2.1 million use
of cash for operating activities was due primarily to increases in accounts
receivable of $4.7 million and other receivables

30
<PAGE>

of $2.1 million, which were offset in part by the net income, and increases in
current liabilities for the same period. The increase in accounts receivable
resulted from the growth in revenues during the same period and the timing of
revenue recognition during the quarters within the period. The cash generated
from operating activities in 1996 resulted primarily from the generation of
net income for the year of $387,000 and increases in deferred revenues and
accrued liabilities. The Company generated cash of $2.1 million from operating
activities for the six months ended June 30, 1997 and used cash of $1.5
million for operating activities for the same period in 1998. The cash
generated for the six months ended June 30, 1997 resulted from increases in
amounts due to Nortel for expenses incurred by Nortel on behalf of the Company
and increases in accrued liabilities. The increase in cash used for operating
activities for the six months ended June 30, 1998 was related primarily to an
increase in accounts receivable of $2.8 million and in the net loss of $1.2
million, before the non-cash charge for acquired in-process research and
development, which were offset in part by an increase in accounts payable of
$1.7 million. The average days sales outstanding increased from 59 days at
December 31, 1996 to 80 and 87 days at December 31, 1997 and June 30, 1998,
respectively. For purpose of calculating average days sales outstanding, the
Company divides ending accounts receivable by the current quarter's revenues
and multiplies this amount by 90 days. The increase in days sales outstanding
was primarily attributable to an increase in the number of license
transactions closing at quarter end. The level of accounts receivable at each
quarter end will be affected by the concentration of revenues in the final
weeks of each quarter and may be negatively affected by the expanded
international revenues in relation to total revenues as licenses to
international customers often have longer payment terms.

The Company's uses of cash for investing activities were for the purchase of
fixed assets and totaled $536,000, $693,000, $895,000 and $995,000 for the
years ended December 31, 1995, 1996 and 1997 and for the six months ended June
30, 1998, respectively. In 1997, the Company invested $8.6 million in short-
term investments, net of $3.7 million of dispositions of short-term
investments. Cash provided from investing activities for the six months ended
June 30, 1998 included $11.9 million from dispositions of short-term
investments, net of purchases of $5.1 million of short-term investments and
$4.4 million of cash related to the acquisition of r/3/.

During 1995, 1996 and 1997, the Company's financing activities were
primarily transfers of cash to and from Nortel, except for the net proceeds of
$16.0 million from the sale of Series B Common Stock in 1997.

As of June 30, 1998, the Company's principal sources of liquidity were its
cash and cash investments of $4.4 million. The Company believes that the net
proceeds from the sale of Common Stock offered by the Company together with
cash from operations and existing cash and cash equivalent balances will be
sufficient to meet its cash needs for at least the next 12 months.

31
<PAGE>

BUSINESS

Entrust develops, markets and sells products and services that allow
enterprises to manage trusted, secure electronic communications and
transactions over today's advanced networks, including the Internet, extranets
and intranets. The Entrust solution automates the management of digital
certificates, which are similar to electronic passports, through PKI
technology designed to assure the privacy and authenticity of internal and
external electronic communications. The Entrust PKI is an integrated, open and
scalable software framework that operates across multiple platforms, network
devices and applications, including e-mail, browsers, electronic commerce,
electronic forms, remote access and other product offerings from leading
vendors. The Company's product suite was first released in 1994, and has since
been licensed for use in global enterprises and government entities such as
the Canadian government, Citibank, the FDIC, J.P. Morgan, NASA, the Republic
of Singapore and the United Kingdom Post. In addition, over three million
Entrust certificates have been issued to date for use by the Company's
customers.

INDUSTRY BACKGROUND

The widespread adoption in recent years of public and private networks has
revolutionized the manner in which organizations communicate and conduct
business. These advanced networks provide an attractive medium for
communications and commerce because of their global reach, accessibility, use
of open standards and ability to permit interactions on a real-time basis.
Proliferation of these networks has facilitated the storage, analysis and
communication of critical information within and between organizations. At the
same time, they have afforded businesses a user-friendly, low-cost way to
conduct a wide variety of commercial functions electronically. Today,
organizations are increasingly utilizing these networks to access new markets,
improve customer service and streamline business processes through
applications such as e-mail, messaging, remote access, intranet-based
applications, on-line customer support and supply chain applications.

NEED FOR SECURE TRANSACTIONS

The very openness and accessibility that have stimulated the adoption and
growth of public and private networks create threats to the privacy and
integrity of information that is transmitted across or stored on them.
According to a survey taken at a 1997 industry conference, 70% of respondents
cited security concerns as the principal impediments to a broader use of the
Internet for commercial applications. Key consumer security concerns include
merchant impersonation, fraud and the risk that third parties may intercept
and use personal information such as credit card numbers, all of which may
inhibit the broader adoption of electronic commerce. Businesses relying on
public and private networks for internal communications risk the theft, loss,
alteration or dissemination of confidential data, loss of reputation and
economic loss through fraud. Threats to corporate data security arise both
from external sources such as competitors and computer hackers, as well as
internal sources, such as curious or disgruntled employees and contractors.
According to a recent FBI report, among U.S. enterprises reporting that they
had experienced computer security breaches, the average financial losses from
internal breaches were significantly higher than the losses sustained from
external breaches. These business risks have driven the demand for effective
and robust network and information security products.

32
<PAGE>

The security risks associated with communications and commerce over public
and private networks have accentuated the need for information security
solutions that address the five critical network security needs:

. ACCESS CONTROL--Only authorized users should access, view or modify
certain data

. CONFIDENTIALITY--Data in transit over the network or in storage should
not be disclosed to unauthorized persons

. INTEGRITY--Data should not be altered or compromised by unauthorized
manipulation

. AUTHENTICATION--The identity of the data sender should be verified

. NON-REPUDIATION--The sender of a transmission should not be able to deny
or repudiate the transmission

A wide range of products and services has been introduced to address one or
more of these five critical network security needs. For example, access
control is provided by products such as firewalls and password tokens, which
limit network access only to users having recognized addresses or entering
recognized passwords, but are limited in their flexibility and do not address
such requirements as confidentiality, integrity, authentication and non-
repudiation. Encryption devices and programs provide confidentiality, but are
device-dependent and do not address issues of access control, integrity,
authentication and non-repudiation. The lack of flexibility and scalability
inherent in these solutions has led to the development of public key
encryption and digital certification systems combined in a public key
infrastructure, which can address all five critical network security needs.

PUBLIC KEY SECURITY

A public key infrastructure uses encryption algorithms in combination with
authentication and verification technology offered by digital certificates to
provide the user with a secure and reliable means of communicating and
effecting transactions over public and private networks.

PUBLIC KEY ENCRYPTION. Digital messages are encrypted and decrypted using a
cipher or key. Public key encryption systems assign each user a pair of linked
keys: a "public" key, which the user provides to others, and a "private" key,
which the user keeps secret. A user wishing to send a secure transmission
encrypts the transmission using the recipient's public key. To decode the
transmission, the recipient uses a private key that is uniquely able to decode
messages encoded with his or her corresponding public key. Thus, the
successful exchange of encrypted messages using a public key system requires
that message senders have the public keys for all recipients to whom they
desire to send messages, and that the recipients decode messages with their
own private keys. Public key encryption provides a high level of data
security, and thus addresses an enterprise's need for confidentiality of
electronic transmissions. However, because encryption alone does not give the
recipient of a message any information about the sender or ensure that a
message is not altered en route, the requirements for access control,
integrity, authentication and non-repudiation are not satisfied.

DIGITAL CERTIFICATION. The ability to ensure access control, authentication
and non-repudiation of digital transmissions can be achieved with digital
certification systems, which enable a recipient to verify that a message
originates from the expected sender. These systems use public and private keys
to create a special file called a digital signature. This signature is encoded
using the sender's private key. Upon receipt of the message, the recipient
obtains a copy of the sender's public key from a directory established by a
trusted administrator (a "Certification Authority" or "CA"), which verifies
that the message originated from the expected sender. Digital certificates
thus function as electronic passports that not only authenticate their owners'
identities and verify their owners' membership in certain organizations, but
also establish their owners' authority to engage in a given transaction.
Digital signature and certification technology can also be used to ensure the
integrity of a message by enclosing an encrypted summary or "hash" of the
message with the sender's digital

33
<PAGE>

signature. When the signature and hash are decrypted using the sender's public
key supplied by the CA, the system can automatically detect whether the
message was altered since it was signed.

MARKET ACCEPTANCE OF DIGITAL CERTIFICATION. Because of its security
benefits, digital certification has gained significant market acceptance,
particularly in sectors in which information security is critical, such as
government, finance, health care and telecommunications. Industry sources
believe that by 2000 digital certificates will be nearly as widely adopted by
the general public as e-mail is today. At least 40 U.S. states, as well as the
U.S. and Canadian governments and the European Union, have adopted or are
considering digital signature statutes that recognize the legal validity of
digitally signed documents. In addition, the banking industry's Secure
Electronic Transaction (SET) standard for Internet credit card purchases, as
well as the Internet secure packet transmission standard (IPsec) adopted by
most firewall, routing and access vendors, depend on digital certification.

NEED FOR A PUBLIC KEY INFRASTRUCTURE

The increasing acceptance of digital certificates has given rise to numerous
products and services that issue digital certificates or that are digital
certificate-ready. However, the mere issuance of digital certificates does not
ensure that a user's access is properly monitored, that privileges associated
with access are accurately and currently defined, or that the certificates in
question have not been withdrawn or replaced. Indeed, the proliferation of
users and certificates greatly complicates management of these issues, which
are critical to maintaining an effective security environment across and
between enterprises. To address these needs, enterprises must have a robust
public key infrastructure that supplements certificate issuance functions with
full life cycle management of public keys, including issuance, authentication,
storage, retrieval, backup, recovery, updating and revocation, in an easy-to-
use, cost-effective manner.

Moreover, unless digital certificates can be easily utilized on a consistent
and reliable basis across multiple applications (such as e-mail, browser,
electronic commerce, electronic forms and remote access), organizations will
face the challenge and cost of maintaining a separate security infrastructure
for each application, requiring separate keys and certificates, multiple
passwords and inconsistent or incomplete security implementations.
Furthermore, any PKI must be able to support an enterprise's security
requirements as the enterprise grows, business functions are altered and
underlying IT technologies evolve. To be effective, a public key
infrastructure must be able to accommodate a large number of users and
integrate diverse computing resources into a consolidated, reliable and secure
computing environment that meets the five critical network security needs of
access control, confidentiality, authentication, integrity and non-
repudiation. Achievement of these goals requires a highly functional and
flexible public key infrastructure for the management of network security
features across an enterprise and between organizations.

THE ENTRUST SOLUTION

Entrust develops, markets and distributes a comprehensive public key
infrastructure solution that enables enterprises to effect and manage secure
communications and transactions across a wide range of applications. The
Entrust PKI solution addresses the five critical network security needs of
enterprises and allows for consistent enterprise-wide security policy
management, enabling any enterprise to establish its own flexible, highly
reliable CA. It also offers users encryption functionality and full digital
signature and certification management in a single, easy-to-use, integrated
and automated solution. Among the benefits offered by Entrust's PKI solution
are:

. COMPREHENSIVE FUNCTIONALITY. The Company believes that it is the only
provider of a consolidated PKI solution offering the functionality
necessary for the full life cycle management of public keys and digital
certificates including: certificate issuance, certificate
authentication, key storage and backup, key retrieval and recovery,
certificate updating, certificate revocation and cross-certification of
CAs.

34
<PAGE>

. MULTIPLE CERTIFICATE TYPES. The Entrust PKI supports multiple
certificate types and configurations, including enterprise certificates
that can be used across multiple applications, Web certificates for
secure Web transactions, electronic commerce certificates supporting
secure credit card transactions using the SET standard and certificates
for evolving communications technologies such as VPNs.

. VERSATILE, OPEN PLATFORM. The Entrust PKI enables secure transmissions
across a wide range of computing platforms (including Windows NT and
UNIX servers and Windows, UNIX, Macintosh and JAVA clients), enterprise
applications (including e-mail, browser, electronic commerce, electronic
forms and remote access), network infrastructure (including firewalls,
network operating systems and directories), and open industry standards
(such as the lightweight directory access protocol ("LDAP") and PKCS
11).

. HIGHLY SCALABLE ARCHITECTURE. Entrust products employ a distributed
computing architecture and directory management techniques that make
them highly scalable. The Company believes that its PKI solution, with
appropriate directory additions, can be configured to handle millions of
simultaneous users.

. EASE OF USE. Entrust products automatically effect complex certification
and key recovery functions without user interaction; most functions are
initiated using simple point and click graphical interfaces and are
accessed via a single user login.

. REDUCED COST OF OWNERSHIP. Because the Entrust PKI's comprehensive
functionality reduces duplication of personnel, its ease of use
simplifies training, and its ability to interact with a wide variety of
platforms and applications avoids the need to purchase multiple security
systems, the Entrust PKI enables enterprises to significantly reduce
overall costs for addressing security requirements.

STRATEGY

The Company's objective is to maintain and enhance its position as the
leading provider of comprehensive PKI solutions. Key elements of the Company's
strategy to achieve this objective include the following:

. MAINTAIN PRODUCT LEADERSHIP. The Company's PKI solution has been
deployed commercially through multiple versions for approximately four
years. The Company's technological leadership is attributable in large
part to its 140-person research and development team, which includes
researchers with international reputations in their fields. The Company
intends to maintain and enhance its technological leadership in the PKI
solutions market by continuing to invest in product research and
development, to extend the functionality and interoperability of its
products, and to participate actively in industry standards-setting
organizations.

. TARGET LARGE CUSTOMERS. The Company targets its sales and marketing
activities at Global 2000 organizations and large governmental entities
having significant requirements for comprehensive PKI solutions and the
resources to deploy them broadly. To address this market, the Company
maintains an experienced direct sales force and an active marketing
program targeted at large organizations. The Company is expanding its
sales force to address its target market more fully, and is
supplementing its sales force with a services capability to facilitate
implementation and deployment of products by large organizations.

. TARGET VERTICAL MARKETS OFFERING BROAD DEPLOYMENT OPPORTUNITIES. The
Company targets organizations in the government, finance, health care,
telecommunications and large manufacturing sectors, which have thousands
of customers, subscribers and service recipients who will, directly or
indirectly, benefit from the secure communications and transactions
enabled by the Company's PKI solution. The Company believes that the
successful implementation of its PKI solution within these selected
vertical markets will

35
<PAGE>

enable it to leverage the adoption of its products by such organizations
to include their customers, subscribers and service recipients.

. PROMOTE BRAND AWARENESS. The Company's goal is to equate its brand name
with trusted enterprise security. The Company undertakes a variety of
activities to promote the recognition of its brand identity and
products, including the promotion and sponsorship of industry groups and
conferences such as the Entrust SecureSummit in June 1998. The Company
also promotes its product standards and architecture by participating
actively in numerous industry standards-setting bodies.

. EXPAND STRATEGIC RELATIONSHIPS. In order to encourage widespread
acceptance of its PKI solution, the Company has established an Entrust
Partner Program which currently includes: (i) VAR and OEM partners, such
as Digital Equipment Corporation, EDS, Hewlett-Packard, IBM and Tandem,
which resell the Company's products with their hardware and networking
solutions, as well as Check Point Software and Symantec, which plan to
bundle the Company's PKI solution with their own software products; (ii)
consultant and system integration partners, such as Coopers & Lybrand,
Deloitte & Touche and KPMG Peat Marwick, which recommend and implement
Entrust-Ready security solutions as part of their overall service
offerings; (iii) development partners, which have introduced more than
50 off-the-shelf Entrust-Ready applications and (iv) interoperability
partners such as Cisco, Lotus Development, Netscape and Shiva, which
offer products that utilize the security features of the Entrust PKI
solution. The Company intends to continue to invest in and enhance the
Entrust Partner Program both to offer complete end-to-end security
solutions to its customers and to broaden adoption of its PKI solution
across markets and geographic areas.

. EXPAND GLOBAL PRESENCE. The Company intends to expand its global
operations and currently has more than 55 employees based in Europe,
which it believes to be the largest European presence of any firm in the
PKI industry. With its acquisition of r/3/ in June 1998, the Company
obtained substantial European research and development expertise for the
development of its PKI solution targeted at the European market. The
Company has supplemented its established direct sales and distribution
channels through the addition of distribution partners in central and
eastern Europe and Japan.

PRODUCTS AND PRODUCT DEVELOPMENT

The Entrust PKI solution provides an integrated, open and scalable security
framework that addresses an enterprise's data security needs across multiple
platforms and applications, including e-mail, browsers, electronic forms,
remote access and other product offerings from leading vendors. It also
includes robust features (such as support of dual key pairs) that make it well
suited for secure electronic commerce applications. The Entrust solution
includes: (i) a core PKI solution, which centrally manages and administers an
enterprise's security infrastructure, (ii) desktop applications that tightly
integrate features with Entrust's core PKI and common third-party desktop
applications, and (iii) application developer toolkits that provide open
application programmer interfaces (APIs) for the rapid development of Entrust-
Ready applications.

The Entrust core PKI solution comprises server software that manages and
administers life cycle digital certificates throughout an enterprise, an LDAP-
compliant directory for the storage and retrieval of keys, and
workstation/client software that enables users to utilize the functions
provided by the PKI. The core PKI solution is a powerful and flexible platform
for the generation and management of digital certificates, including
enterprise certificates supporting single or multiple applications within an
organization, Web certificates embedded on individual user browsers for
transaction authentication or electronic commerce certificates supporting
secure credit card transactions using the SET

36
<PAGE>

standard. The core solution is also configured to support the generation of
certificates for evolving communications technologies, such as VPNs, and
multiple hardware devices, such as smart cards, PC cards, biometric devices
and third-party key storage systems.

[ENTRUST PKI SOLUTION OVERVIEW FLOW CHART APPEARS HERE]

The graphic is entitled "Entrust PKI Solution Overview" and is structured as
follows:

There is a large rectangular box that contains the names of the products
constituting the Company's core PKI solution: (i) Entrust/Authority and
Entrust/Admin and (ii) Entrust Electronic Identities (Enterprise, Web, E-
Commerce and VPN (expected to become available in late 1998) Certificates).
Arrows emanate from the large box toward smaller boxes representing the
following: (a) applications (Entrust, Entrust-Ready (through the Entrust
Toolkit) and Third-Party (through Entrust Plug-Ins)), (b) the
Entrust/Directory, (c) network and firewalls and (d) hardware, smart cards and
other add-ons. The boxes representing Third-Party applications and the items
described in clauses (c) and (d) are shaded in gray.

/1/Expected to become available in late 1998.

ENTRUST CORE PKI SOLUTION

The Company's core PKI solution is designed with an open and flexible
software architecture that operates on a wide range of client/server
enterprise operating system platforms, including Windows NT, HP-UX, Solaris
and AIX servers, and Windows, HP-UX, Solaris, AIX, JAVA and Macintosh clients.
Its security kernel supports a wide variety of encryption algorithms,
including RSA, as well as symmetric and hashing algorithms, allowing customers
to select those algorithms best suited for their requirements. In addition to
its own directory system, the core system uses the industry LDAP standard to
interoperate with most other major certificate directory systems, allowing
customers to utilize existing directory systems and facilitating access to
other directories as required. The system architecture enables the Company to
add functionality as customer needs evolve and grow and allows the core system
to support the generation and maintenance of new certificate types easily,
responding to technology developments and market pressures. The system's
distributed computing architecture and directory management techniques also
enable the PKI to be scaled up as an enterprise's public key security needs
increase or as users are added to existing infrastructures. The Company
believes that, with appropriate directory additions, its core PKI solution
will be able to handle millions of simultaneous users.

37
<PAGE>

The initial version of the Entrust PKI was released in 1994, with major
upgrades in 1996 and 1997; historically, the core solution has generated a
major portion of the Company's revenues. The last major release of the core
PKI, version 4.0, occurred in July 1998. The following table lists the
products that constitute Entrust's core PKI solution, as well as a brief
description and the introduction date of each product.

<TABLE>
<CAPTION>
PRODUCT NAME DESCRIPTION INTRODUCTION DATE
<S> <C> <C>
ENTRUST/AUTHORITY Provides comprehensive December 1994
certification authority and key
recovery capabilities, among
numerous other functions
- --------------------------------------------------------------------------------------
ENTRUST/ADMIN Performs PKI administrative tasks December 1994
- --------------------------------------------------------------------------------------
ENTRUST/DIRECTORY Scalable directory system for the June 1995
storage of key information
- --------------------------------------------------------------------------------------
ENTRUST ELECTRONIC Enterprise user "accounts" that December 1994
IDENTITIES authorize use of different types
of certificates, including:
------------------------------------------------------------
. Entrust/Entelligence Enables use of enterprise December 1994
certificates with multiple
enterprise applications
------------------------------------------------------------
. Entrust/Web Connector Enables use of digital March 1997
certificates with popular
browsers, such as those offered
by Microsoft and Netscape
------------------------------------------------------------
. Entrust/CommerceCA Enables use of digital March 1998
certificates with standards-based
SET wallets, merchant servers and
payment gateways
</TABLE>

The Company licenses its Entrust/Authority and Entrust/Admin products at a
combined list price of $15,000 per server. Entrust offers its
Entrust/Directory to enterprises for a list price of $3,000 for installations
of up to 5,000 users and $3,000 plus a per-user fee for installations of more
than 5,000 users. Enterprise Electronic Identities have a list price of $159
per licensed user, which allows the issuance of multiple certificates across
all Entrust-Ready applications in the enterprise. As a part of its core PKI
solution, the enterprise Electronic Identities are offered on a registered-
user basis. If an enterprise solution is not required, the Company also offers
customers with specialized security needs the ability to issue Web and
electronic commerce certificates at a charge of $2 per certificate. The actual
license fees paid by customers vary widely, based on the number of products
licensed, registered users, enabled platforms and volume discounts, if any.

ENTRUST/AUTHORITY. Entrust/Authority is the central component of the Entrust
PKI solution. Entrust/Manager provides the CA function for the Entrust core
PKI, and enables an enterprise to create, issue, manage, back-up, update and
revoke electronic identities. Entrust/Authority also

38
<PAGE>

provides a secure enterprise key recovery system, issues certificate
revocation information, and establishes cross-certification relationships with
other trusted certification authorities. Because Entrust/Authority automates
these functions, users typically need to communicate with Entrust/Authority
only when they are initialized on the system; key update operations are
performed automatically and transparently, minimizing the need for on-going
user involvement. A sophisticated audit reporting system monitors all security
aspects of Entrust/Authority operations.

ENTRUST/ADMIN. Entrust/Admin provides administrative capabilities to three
types of personnel: security officers, Entrust administrators and directory
administrators. Through an easy-to-use graphical interface, security officers
can define the high-level security policies governing the operation of an
Entrust system, such as default lifetimes for encryption and signature key
pairs and the frequency with which certificate revocation lists (CRLs) are
automatically distributed. Entrust/Admin allows Entrust administrators to
perform the system's day-to-day administrative duties, including creating and
deleting user identities, changing users' names, helping users recover lost
keys and forgotten passwords, and revoking users' certificates when necessary.
Entrust/Admin also allows directory administrators to perform administrative
tasks associated with the directory on an automated, high-volume basis.

ENTRUST/DIRECTORY. As a convenience for its PKI customers, Entrust offers a
scalable LDAP-compliant directory for the storage of key information. The core
PKI solution will also operate with many other LDAP-compliant directories.

ENTRUST ELECTRONIC IDENTITIES. An Entrust Electronic Identity is an
individual user's "account" within the PKI. Entrust offers Electronic
Identities for full enterprise use, or for more limited Web or electronic
commerce use. An Entrust/Entelligence Electronic Identity can support numerous
key pairs and certificates over its lifetime, which may be utilized across
multiple Entrust-Ready and other third party applications. Updating of key
pairs and certificates is performed automatically and transparently and,
therefore, administrative overhead is reduced. These Electronic Identities are
implemented on client-side software that provides an easy-to-use interface
enabling users within an Entrust PKI to secure and unsecure files. This
software also allows users to specify options (such as file compression) and
select cryptographic algorithms while making the complexities of key and
certificate management transparent. An Entrust/Web Connector Electronic
Identity enables a user to use certificates with popular Web browsers and Web
servers, such as those offered by Netscape and Microsoft. These Web
certificates can have lifetimes that span multiple years and do not require
renewal on a yearly basis. Entrust/Commerce CA Electronic Identities enable
secure electronic commerce through the issuance and management of certificates
for SET wallets, merchant servers and payment gateways.

In addition to its enterprise core PKI solution, the Company also offers two
introductory PKI products: Entrust/Lite, which provides a PKI for workgroups
of up to 200 users, and Entrust/Solo, which provides individual users with
public key encryption and digital certificate capabilities. Entrust/Lite is
licensed for $50 per user and Entrust/Solo, which may be downloaded from the
Internet, is licensed for $49 for commercial use and for free for non-
commercial use.

ENTRUST APPLICATIONS

The Company's core PKI solution has been configured to support a wide
variety of applications from multiple vendors to enhance its flexibility and
usefulness. The Company has also developed a number of applications in order
to meet specific customer demands and facilitate the implementation of the
Entrust core PKI solution. These products either complement and interact with
the core PKI to offer the user enhanced functionality and increased
interoperability with third-party applications, or operate as independent
products, offering distinct functionality.

39
<PAGE>

The following table lists applications offered by the Company, including a
brief description, product pricing and the introduction date for the product.

<TABLE>
<CAPTION>
PRODUCT NAME DESCRIPTION PRICING INTRODUCTION
DATE
<C> <S> <C> <C>
ENTRUST/ICE 2.0 Provides security for files $39 per user March 1997
and folders
- ---------------------------------------------------------------------------------------
ENTRUST/EXPRESS 2.0 Provides security for $39 per user June 1997
popular e-mail
applications, such as
Microsoft's Exchange and
Outlook products
- ---------------------------------------------------------------------------------------
ENTRUST/DIRECT 3.0 Provides Entrust's $15 per user December 1997
automated key and
certificate management
features to secure Web
sessions
- ---------------------------------------------------------------------------------------
ENTRUST-READY Provides Entrust's $15 per user March 1998
NETSCAPE SOLUTION 1.0 automated key and
certificate management
features to Netscape's
Communicator 4.0 and
Enterprise Server
- ---------------------------------------------------------------------------------------
ENTRUST/TRUE DELETE 2.0 Securely deletes files Currently bundled April 1998
with other
Entrust products
- ---------------------------------------------------------------------------------------
ENTRUST/ENTERPRISE Provides a variety of $99 per user July 1998
DESKTOP SUITE 1.0 solutions including secure
e-mail, desktop encryption,
secure Web sessions,
secure file deletion and
customizable installation
in
a single software package
</TABLE>

APPLICATION DEVELOPER TOOLKIT

Because certificate management represents the most difficult aspect of
adding security to an application, the Company has provided the
Entrust/Toolkit to enable application developers to make third-party
applications Entrust-Ready while keeping the complexities of key and
certificate management transparent. The Entrust/Toolkit is a family of open,
easy-to-integrate security APIs that provide security services, including full
key life cycle management, to a broad range of applications.

NEW PRODUCT DEVELOPMENT

Entrust devotes significant resources to the development of new and enhanced
product functionality to maintain its technology and product leadership. The
Company employs a number of different methods for identifying product
extension opportunities and new product candidates,

40
<PAGE>

including user group meetings and direct feedback, an active program of
partnership and cooperation with companies developing complementary
technologies, and continued participation and leadership in industry
standards-setting bodies such as the Internet Engineering Task Force (IETF),
the North American Clearinghouse Association (NACHA), the American National
Standards Institute (ANSI) and others.

Some of the Company's current and planned product development efforts
include the use of certificate distribution with new devices (such as cellular
telephones, pagers and personal digital assistants), attribute certificates
for privilege management, electronic notary services, and monitoring and
assessment systems. The Company is also continuing to increase the number of
third-party applications and services that the Company's PKI solution can
manage, including VPN devices and routers and other popular user applications.
Entrust scientists are also actively engaged in the development and
improvement of the advanced cryptographic algorithms for use in Entrust
products, including exploration of the use of highly efficient algorithms such
as elliptical curve encryption.

PROFESSIONAL SERVICES AND SUPPORT

The Company believes that a high level of service and support is critical to
its success, and that a close and active service and support relationship is
important to facilitate rapid implementation of its solutions, assure customer
satisfaction and provide the Company with important information regarding
evolving customer requirements. Toward that end, the Company has made a
significant investment in expanding its professional services and support
organization, which, as of June 30, 1998, consisted of 68 employees. The
Company's professional services providers have a broad range of experience in
network security and include mathematicians, cryptographers and system
designers.

The Company's professional services organization provides consulting and
systems integration services to support customers in designing, implementing
and running their PKI solutions. Activities of the professional services
organization are supplemented with a professional services partner program
that includes Coopers & Lybrand, Deloitte & Touche and KPMG Peat Marwick. To
facilitate the integration of PKI management into the customer's business
operations, the Company also offers its Entrust InSource service, in which the
Company provides on-site PKI management for customers on a long-term basis, or
while the customer implements and trains personnel.

The Company's support offerings also include direct telephone consulting
support by experienced technical account representatives, toll-free telephone
customer support, 24-hour pager access, e-mail and fax support, Internet
access to the Company's knowledge repository, and discussion group access.
Payment of an annual maintenance fee also entitles customers to receive
software enhancements to their licensed versions of the Company's solution.

RESEARCH AND DEVELOPMENT

The Company's research and development efforts are focused on developing new
products, core technologies and enhancements to existing product lines to
maintain and extend its technology and product leadership position. The
Company spent approximately $2.3 million, $2.9 million and $5.7 million on
research and development in 1995, 1996 and 1997, respectively.

As of June 30, 1998, the Company's research and development staff consisted
of 140 employees, several of whom have international reputations in their
respective disciplines. With the addition of r/3/, the Company has added
significant research and development capabilities in Europe, including an
internationally recognized cryptographic team.

The Company's research and development staff is active in several prominent
standards-setting bodies, including IETF, ANSI, the Internet PKIX group and
ISO, and has contributed to a number of

41
<PAGE>

standards in the Internet and data security areas. The Company believes that it
is well-situated to respond to changes in relevant industry standards and to
continue to participate in the development of these standards as the
requirements of enterprises and users become increasingly complex.

CUSTOMERS

The Company's customers are generally domestic and foreign government
entities and Global 2000 companies, including financial, health care,
telecommunications and large manufacturing organizations. As of June 30, 1998,
the Company had licensed its software to more than 500 customers. The following
is a representative list of the Company's current customers that have accounted
for more than $200,000 of revenues each:

Banco Nazionale di Lavorno Interpay
J.P. Morgan
Bell Emergis
Canadian Dept. of National Defense
Citibank Nortel
Royal Canadian Mounted Police
Columbia Information Systems S.W.I.F.T.
Science Applications International
Digital Medical Systems
FDIC United Kingdom Post
Industry Canada U.S. Coast Guard

SALES, MARKETING AND BUSINESS DEVELOPMENT

The Company offers its products and services through a multi-tiered approach
reflecting the characteristics and buying behavior of the markets it covers. As
of June 30, 1998, the Company had 133 employees in sales, marketing and
business development.

DIRECT SALES

To address its target market of Global 2000 organizations, the Company sells
its products and services in North America, the United Kingdom and Germany
primarily through a direct sales force. The Company believes that direct
coverage by the Company's sales force is necessary in light of the early stage
of PKI adoption and the sophisticated requirements of its targeted customer
base. The Company also believes that a direct sales force gives it a
competitive advantage in responding to customer needs as they evolve. The
Company's direct sales force is divided into five North American regions, the
United Kingdom and Germany. Within each region, teams are assigned specific
accounts as their exclusive responsibility. The Company has also focused its
sales efforts on key vertical markets that have a critical need for security
and understand the value it creates for their businesses. These markets include
government, finance, health care, telecommunications and large manufacturing.

The Company has established a General Markets Sales Group responsible for
pursuing identified customer opportunities outside the defined responsibilities
of the regional sales teams and accelerating the sales cycle. The direct sales
organization is also supplemented by targeted direct mail and telemarketing
campaigns developed by the Company's marketing organization.

42
<PAGE>

INDIRECT SALES

To supplement its direct sales force, the Company has established an Entrust
Partner Program involving a range of technology, marketing and sales
relationships including:

. VAR and OEM partners that focus on creating bundled solutions to permit
customers to purchase total desktop applications incorporating Entrust
functionality. These partners include Digital Equipment Corporation,
EDS, Hewlett-Packard, IBM and Tandem, which resell the Company's
products with their hardware and networking solutions, as well as Check
Point Software and Symantec, which plan to bundle the Company's PKI
solutions with their own software products.

. Interoperability partners such as Cisco, Lotus Development, Netscape and
Shiva, which offer products that utilize the security features of the
Entrust PKI solution.

. Consultant and systems integration partners that recommend and implement
Entrust-Ready security solutions as part of their overall service
offerings to customers, thereby differentiating their offerings through
the inclusion of PKI functionality. These partners include Coopers &
Lybrand, Deloitte & Touche and KPMG Peat Marwick.

. Referral partners that refer their consulting and integration customers
in designated markets to the Entrust PKI solution.

. Distributors and agents that promote and sell the Company's products in
defined geographic markets.

MARKETING

To support its sales force, the Company has a marketing group whose goals
are to create a consistent, focused communication strategy that increases
awareness of the Company's PKI solution and brand name, and to leverage that
awareness in the identification of new sales opportunities. The marketing
group conducts marketing programs that include direct mail, trade shows,
annual seminar series, executive breakfasts and ongoing customer communication
programs. The Company has organized a number of major trade shows, including
the Entrust SecureSummit '98 held in Chicago in June 1998. The Company also
provides frequent Web updates, search engine registration, online advertising
and product downloads. The Company's marketing personnel are dedicated to
maximizing brand success and periodically evaluating the Company's brand
recognition.

BUSINESS DEVELOPMENT

To identify and develop strategic relationships with targeted industry
partners more effectively, the Company has a business development organization
of 21 persons that pursues selected business development activities, including
the administration and promotion of the Company's Entrust Partner Program.
These activities permit the Company to strengthen relationships with existing
strategic partners and identify and encourage new providers of software,
network, computing and communications products to make their products Entrust-
Ready.

COMPETITION

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<PAGE>

and private networks. Certain of these companies, such as IBM and XCert,
provide a product-based solution, while others, such as VeriSign and GTE
Cybertrust Solutions, are primarily service providers. The Company also
competes with companies, such as Baltimore Technologies of Ireland, which
offer PKI product solutions for enterprises. In addition, the Company expects
to compete with established companies developing new PKI offerings, such as
Security Dynamics and Network Associates, which have each announced their
intention to introduce PKI products that would be integrated with their other
security product offerings, as well as Microsoft Corporation, which has
announced its intention to offer a certificate server product based on its
existing security framework in the near future. The Company expects that there
will be additional entrants to this marketplace. In addition, other major
networking vendors could, in the future, bundle digital certificates with
their product offerings. The Company typically competes with these vendors and
service providers on the basis of its ability to provide a centrally managed,
real-time, comprehensive infrastructure with the features and functionality to
support enterprise applications. In addition, the Company competes in the
emerging market for providing security across VPNs with most major networking
device companies, such as Ascend and Cisco, as well as firewall vendors such
as AXENT (Raptor) and Check Point Software.

The Company believes that the principal competitive factors affecting the
market for PKI technology include technical features, ease of use,
quality/reliability, level of security, scalability, customer service and
support and price. Although the Company believes that its products currently
compete favorably with respect to such factors, there can be no assurance that
the Company can maintain its competitive position against current and
potential competitors. See "Risk Factors--Competition". Many of the Company's
current and potential competitors have longer operating histories, greater
name recognition, larger installed bases and significantly greater financial,
technical, marketing and sales resources than the Company. As a result, they
may be able to react more quickly to emerging technologies and changes in
customer requirements, or to devote greater resources to the promotion and
sale of their products than the Company. In addition, certain of the Company's
current competitors in particular segments of the security marketplace may in
the future broaden or enhance their offerings to provide a more comprehensive
solution competing more fully with the Company's functionality. The Company
may also compete in the future for sales of Entrust products against its OEM
licensees, who resell the Entrust solution under their own brand names.

REGULATORY MATTERS

The Company's products are subject to special export restrictions
administered by the governments of the United States, Canada and other
countries. The Company's products are also subject to import restrictions
and/or use restrictions imposed by countries such as France. Consequently, the
ability of the Company to export its products to destinations outside of the
U.S. and Canada is subject to a variety of government approvals or licensing
requirements. These export controls may also restrict the ability of the
Company to make some products available for sale via international computer
networks such as the Internet. Re-export of the products between countries
other than the U.S. and Canada may be subject to the export control laws of
those countries in addition to those provisions of the U.S. and/or Canadian
export control laws which apply to re-exports. In light of these restrictions,
the Company's products made available abroad may contain significantly weaker
encryption capabilities than those available to customers in the U.S. and
Canada, and there can be no assurance that the Company will continue to be
able to export its products to any destinations outside of the U.S. and
Canada. Such restrictions could potentially have an adverse effect on the
Company's business, financial condition or results of operations. See "Risk
Factors--Industry Regulation".

In October 1996, the U.S. government announced a new export control policy
for encryption products. Under the new policy, cryptography of any strength
may be authorized for export, after a one-time government review, as long as
the product provides for a key recovery method which will enable authorized
law enforcement agencies to access the keys required to decrypt lawfully

44
<PAGE>

intercepted encrypted data without the knowledge or consent of the user of the
encryption product. The U.S. government regulations provide flexibility with
respect to what specific key recovery mechanisms will be permitted; the
Company's products already provide some built-in key recovery features, and
the Company believes that its product architecture will satisfy the
government's criteria with few modifications.

Under an interim procedure in effect through December 31, 1998, vendors of
encryption products may be granted six-month authorizations to export from the
U.S. encryption products with key lengths between 40 and 56 bits, provided
that the vendor submits a written plan to develop a key recovery feature prior
to December 31, 1998, and shows satisfactory progress toward implementing that
plan. Each product is still subject to a one-time government review in order
to become eligible for this interim authorization. The Company has obtained
permission under this provision, which expires on December 31, 1998, to have
certain of its products exported without modification from the U.S. by U.S.
customers with operations abroad and by third-party distributors.

In the absence of a key recovery mechanism or an approved plan for such a
mechanism, current U.S. government policy is to prohibit exports (except to
Canada) of most encryption products with key lengths of greater than 56 bits,
except under individual licenses which may authorize exports of stronger
encryption products to financial institutions, subsidiaries of U.S. companies
and government agencies.

INTELLECTUAL PROPERTY

The Company relies on a combination of patent, copyright, trademark and
trade secret laws, nondisclosure agreements and other contractual provisions
to establish, maintain and protect its proprietary rights. The Company owns
five issued U.S. patents (along with corresponding, pending foreign patent
applications) and 26 pending U.S. patent applications relating to the Entrust
products. These patents are and will continue to be subject to certain license
grants to others, including Nortel and its cross licensees, under patent cross
license agreements. See "Certain Transactions". The Company has copyright and
trade secret rights for its products, consisting mainly of source code and
product documentation. The Company uses a printed "shrink-wrap" license for
users of its products in order to protect certain of its copyrights and trade
secrets. The Company attempts to protect its trade secrets and other
proprietary information through agreements with suppliers, non-disclosure and
non-competition agreements with employees and consultants and other security
measures.

45
<PAGE>

There can be no assurance that the Company will seek patents on its
technology or products, that any such patents will be issued or that any such
additional patents will be sufficiently broad to protect the Company's
technology or products. The status of computer-related patents involves
complex legal and factual questions and the breadth of claims allowed is
uncertain. Accordingly, there can be no assurance that patent applications
filed by the Company will result in patents being issued or that its existing
patents, and any patents that may be issued to it in the future, will afford
protection against competitors with similar technology, nor can there by any
assurance that patents issued to the Company will not be infringed upon or
designed around by others or that others will not obtain patents that the
Company would need to license or design around. If existing or future patents
containing broad claims are upheld by the courts, the holders of such patents
might be in a position to require companies to obtain licenses. There can be
no assurance that licenses that might be required for the Company's products
would be available on reasonable terms, if at all.

The Company relies on outside licensors, including RSA, for patent and/or
software license rights in encryption technology that is incorporated into and
is necessary for the operation of the Company's products. The Company's
success will depend in part on its continued ability to have access to such
technologies that are or may become important to the functionality of its
products. Any inability to continue to procure or use such technology could
have a material adverse effect on the Company's business, financial condition
and results of operations.

Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or
to obtain and use information that the Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, such piracy can be expected to be a persistent problem,
particularly in international markets and as a result of the growing use of
the Internet. Some courts have held that shrink-wrap licenses, because they
are not signed by the licensee, are not enforceable. There can also be no
assurance that the Company's trade secrets or confidentiality agreements will
provide meaningful protection of the Company's proprietary information.
Furthermore, there can be no assurance that others will not independently
develop similar technologies or duplicate any technology developed by the
Company or that the Company's technology will not infringe upon patents of
other rights owned by others. The Company's inability to protect its
proprietary rights could have a material adverse effect on the Company's
business, financial condition or results of operations.

As the number of information security products in the industry increases and
the functionality of these products further overlaps, software developers and
publishers may increasingly become subject to claims of infringement or
misappropriation of the intellectual property or proprietary right of others.
There can be no assurance that third parties will not assert infringement or
misappropriation claims against the Company in the future with respect to
current or future products. Further, the Company may be subject to additional
risk as it enters into transactions in countries where intellectual property
laws are not well developed or are poorly enforced. Legal protections of the
Company's rights may be ineffective in such countries, and technology
developed in such countries may not be protectable in jurisdictions where
protection is ordinarily available.

46
<PAGE>

EMPLOYEES

As of June 30, 1998, the Company had 398 full-time employees, 289 of whom
were employed by the Canadian Subsidiary. Of the Company's employees, 140 were
involved in research and development, 133 in sales, marketing and business
development, 68 in professional and customer support services and 57 in
administration and finance. No employees are covered by any collective
bargaining agreements, and the Company believes that its relationships with
its employees are good. The future success of the Company, however, will
depend upon its ability to attract and retain qualified personnel. Competition
for such personnel is often intense, and there can be no assurance that the
Company will be able to attract and retain adequate numbers of qualified
personnel in the future. See "Risk Factors--Competitive Market for Technical
Personnel".

FACILITIES

The Company's U.S. headquarters, including its executive offices and
administrative facilities, is located in Richardson, Texas, where it leases
approximately 3,219 square feet of office space. The Company also leases
approximately 69,000 square feet of office space at its Canadian headquarters
in Ottawa, Ontario, Canada. The Company currently intends to lease additional
office space in the Ottawa area to accommodate expected growth in
administrative, sales and marketing, research and development and operations
personnel. The Company also has offices located in London, England and Zurich,
Switzerland.

The Company also has sales offices in Washington, D.C. and New York, New
York, a sales and business development office in Menlo Park, California and a
sales and professional services office in Raleigh, North Carolina. The Company
leases a sales and support office in Bad Homburg, Germany.

LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company or any
of its property are subject.

47
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, their ages and
positions as of June 30, 1998, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
John A. Ryan................... 42 President, Chief Executive Officer and
Director
Brian O'Higgins................ 42 Executive Vice President and Chief
Technology Officer
Bradley N. Ross................ 39 President of European Operations
Michele L. Axelson............. 48 Senior Vice President, Business Development
and Finance and Chief Financial Officer
Richard D. Spurr............... 44 Senior Vice President, Sales and Marketing
Hansen Downer.................. 46 Vice President, Professional Services
David D. Archibald(1).......... 56 Director
F. William Conner(1)........... 39 Director
Frank A. Dunn(2)............... 44 Director
Robert S. Morris(1)(2)......... 43 Director
</TABLE>
- --------
(1)Member of the Compensation Committee.
(2)Member of the Audit Committee.

JOHN A. RYAN has served as President and Chief Executive Officer and as a
director of the Company since its founding in December 1996. From October 1995
until December 1996 he served as the Vice President and General Manager for
the Multimedia and Internet Solutions business unit of Nortel. Prior to that
time, from August 1992 until October 1995, he served as Assistant Vice
President, Marketing for the Enterprise Network group of Nortel. Since joining
Nortel in 1981, he has also served in various senior positions in marketing,
customer service and finance. Mr. Ryan holds a Bachelor of Mathematics degree
from the University of Waterloo, Waterloo, Ontario, and is a Chartered
Accountant.

BRIAN O'HIGGINS has served as Executive Vice President and Chief Technology
Officer of the Company since its founding in December 1996. Mr. O'Higgins co-
founded the Nortel Secure Networks ("NSN") business unit in 1994, which became
Entrust Technologies Inc. in December 1996. Previously, he was employed by
Bell Northern Research Ltd. ("BNR"), the research and development subsidiary
of NTL, which he joined in 1979. Mr. O'Higgins holds a Bachelor of Science
degree in Electrical Engineering from Carleton University, Ottawa, Ontario.

BRADLEY N. ROSS has served as President of European Operations since March
1998. From December 1996 until March 1998, he served as the Company's
Executive Vice President Marketing and Product Line Management. Mr. Ross co-
founded NSN in 1994 with Mr. O'Higgins, which became Entrust Technologies Inc.
in December 1996. Previously, he was employed by BNR, which he joined in 1982
and held various positions in software design and program management for
Nortel's switching products. Mr. Ross holds Bachelor and Master of Science
degrees in Engineering from Queen's University, Kingston, Ontario, and a
Master of Business Administration degree in Management Science from the
Massachusetts Institute of Technology's Sloan School of Management, Cambridge,
Massachusetts.

48
<PAGE>

MICHELE L. AXELSON has served as Senior Vice President, Business Development
and Finance and Chief Financial Officer since joining the Company in May 1998.
From June 1996 until May 1998, she served as the Senior Vice President and
Chief Financial Officer for Scopus Technologies Inc., an enterprise customer
care software company. Prior to that time, from 1979 until June 1996, Ms.
Axelson held various positions at Arthur Andersen LLP, an international public
accounting firm, and was a partner of that firm from 1989 until June 1996. Ms.
Axelson is a Certified Public Accountant and holds a Bachelor of Science
degree in Business Administration from San Jose State University, San Jose,
California.

RICHARD D. SPURR has served as Senior Vice President, Sales and Marketing of
the Company since March 1998. Prior to that time, he served as Senior Vice
President of Global Sales of the Company since joining the Company in June
1997. Prior to joining the Company, from December 1990 to March 1997, he held
numerous executive positions for SEER Technologies, Inc., a developer of
component-based software applications, including Vice President of Strategic
Alliances from January 1994 to November 1996 and Vice President of Major
Accounts from December 1996 to March 1997. From June 1974 until December 1990,
Mr. Spurr served in various sales and sales management positions with IBM. Mr.
Spurr holds a Bachelor of Arts degree from the University of Notre Dame, South
Bend, Indiana.

HANSEN DOWNER has served as Vice President, Professional Services of the
Company since he joined the Company in December 1997. From February 1997 to
November 1997, Mr. Downer served as Vice President of Sales, Marketing and New
Product Development at Interpath Communications, Inc., an Internet service
provider. From March 1996 until August 1996, Mr. Downer served as Vice
President of Customer Service and Telecom Network Design for the Physician's
Desktop Company, a network development company and a subsidiary of Imonics
Corporation. From May 1995 until March 1996, Mr. Downer served as Vice
President of Business Development at Imonics Corporation, a client server
systems integration company focused on the health care industry. Prior to that
time, from 1979 to December 1994, he worked for Nortel in a number of roles.
Mr. Downer holds a Bachelor of Mathematics degree from the University of
Waterloo, Waterloo, Ontario.

DAVID D. ARCHIBALD has been a director of the Company since its founding in
December 1996. Mr. Archibald has served as Vice President and Deputy General
Counsel of NTL since March 1995, and has responsibility for legal affairs of
several of Nortel's operations and business units. Prior to that time, from
April 1979 to March 1995, Mr. Archibald served as Vice President and General
Counsel of Northern Telecom Canada Limited. Mr. Archibald holds a Bachelor of
Commerce degree and a Bachelor of Common Law from Dalhousie University,
Halifax, Nova Scotia.

F. WILLIAM CONNER has been a director of the Company since July 1997. He has
served as Senior Vice President and President of Nortel's Enterprise Data
Networks line of business since February 1998. From August 1995 until February
1998, Mr. Conner served as Executive Vice President, Sales and Marketing for
the Enterprise Networks line of business of Nortel. Prior to that time, from
1992 until July 1995, Mr. Conner held a variety of sales and marketing
executive positions in Nortel's voice and data enterprise lines of businesses.
Mr. Conner holds a Bachelor of Science degree in Mechanical Engineering from
Princeton University, Princeton, New Jersey and a Master of Business
Administration Degree from the University of Pennsylvania's Wharton School,
Philadelphia, Pennsylvania.

FRANK A. DUNN has been a director of the Company since July 1997. Mr. Dunn
has served as the Senior Vice President of Finance and Planning of Nortel
since March 1996. From January 1994 until March 1996, Mr. Dunn served as Vice
President of Finance for Nortel's North American lines of business, a
management division within NTL. Prior to that time, from March 1993 until
January 1994, Mr. Dunn served as NTL's Corporate Controller. Mr. Dunn holds a
Bachelor of Commerce degree from McGill University, Montreal, Quebec.

49
<PAGE>

ROBERT S. MORRIS has been a director of the Company since January 1997. Mr.
Morris founded Olympus Partners, a private investment firm, in 1989 and serves
as Managing Partner of Olympus Private Placement Fund, L.P., Olympus Growth
Fund II, L.P., Olympus Executive Fund, L.P. and Olympus Growth Fund III, L.P.
Mr. Morris serves on the boards of directors of TriNet Corporate Realty Trust,
Inc. and Candlewood Hotel Company, Inc. Mr. Morris holds a Bachelor of Arts
degree from Hamilton College, Clinton, New York and a Master of Business
Administration degree from the Amos Tuck School of Business at Dartmouth
College, Hanover, New Hampshire.

The Company anticipates adding at least one additional member to the Board
of Directors who is unaffiliated with the Company or Nortel.

The members of the Board of Directors were elected pursuant to the terms of
a Stockholders' Agreement, dated as of December 31, 1996, as amended, among
the Company and certain stockholders (the "Stockholders' Agreement"). The
Stockholders' Agreement terminates upon the closing of the Offerings.

Following the Offerings, the Board of Directors of the Company will be
divided into three classes, each of whose members will serve for a staggered
three-year term. The Board will consist of two Class I Directors (Messrs.
Archibald and Morris), two Class II Directors (Messrs. Conner and Ryan) and
one Class III Director (Mr. Dunn). At each annual meeting of stockholders, a
class of directors will be elected for a three-year term to succeed the
directors of the same class whose terms are then expiring. The Company's
Amended and Restated Bylaws (the "Bylaws") provide that such directors are
elected by a plurality of all votes cast at such meeting. The terms of the
Class I Directors, Class II Directors and Class III Director expire upon the
election and qualification of successor directors at the annual meeting of
stockholders held during the calendar years 1999, 2000 and 2001, respectively.
The Amended and Restated Articles of Incorporation of the Company provide for
a Board of Directors composed of five directors, unless otherwise increased or
decreased in the manner provided in the Bylaws. The Bylaws permit the
Company's Board of Directors, by a majority vote, to fix the number of
directors between three and ten.

Each executive officer serves at the discretion of the Board of Directors
and holds office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. There are no family relationships
among any of the directors or executive officers of the Company.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has a Compensation Committee composed of Messrs.
Archibald, Conner and Morris, which establishes the compensation of, and
compensation policies applicable to, the Company's executive officers and
administers and grants stock options and other stock awards pursuant to the
Company's stock plans. The Board of Directors also has an Audit Committee
composed of Messrs. Dunn and Morris, which makes recommendations to the Board
of Directors concerning the appointment or replacement of the Company's
independent public accountants, confers with such accountants regarding such
accountants' audit of the Company and recommends and implements desired
changes to the scope of the Company's audit.

DIRECTOR COMPENSATION

Directors do not receive any cash fees for their services on the Board, but
are reimbursed for expenses incurred in connection with their attendance at
Board and committee meetings. In addition, non-employee directors of the
Company are eligible to receive stock options under the Company's Amended and
Restated 1996 Stock Incentive Plan. See "-- Stock Plans -- Amended and
Restated 1996 Stock Incentive Plan".

50
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1997 for the Company's Chief Executive Officer and
its three other executive officers in the year ended December 31, 1997 whose
salary and bonus totaled at least $100,000 for the fiscal year (together, the
"Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(1)
- ------------------------------------------ ---------- --------- ------------
<S> <C> <C> <C>
John A. Ryan ............................. $ 180,874 $ 79,800(2) 1,445,800
President and Chief Executive Officer
Brian O'Higgins........................... 94,319 46,123(2) 602,400
Executive Vice President and Chief Tech-
nology Officer
Bradley N. Ross........................... 94,175 45,298(2) 602,400
President of European Operations
Richard D. Spurr(3)....................... 68,217 43,820 440,000
Senior Vice President, Sales and Market-
ing
</TABLE>
- --------
(1) Represents the number of shares covered by options to purchase shares of
Common Stock granted during the year ended December 31, 1997. The Company
has never granted any stock appreciation rights.
(2)Represents bonuses paid for 1996 performance at Nortel.
(3)Represents compensation from June 1997 when Mr. Spurr joined the Company.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth all individual grants of stock options to
each of the Named Executive Officers during the year ended December 31, 1997.

OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(2)
-------------------------------------------------------------- -----------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE OR BASE EXPIRATION
NAME OPTIONS GRANTED IN FISCAL YEAR PRICE PER SHARE(1) DATE 5% 10%
- ------------------------ --------------- ---------------- ------------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
John A. Ryan............ 1,445,800(3) 21.4% $2.13 1/1/07 $ 1,932,169 $ 4,896,495
Brian O'Higgins......... 602,400(3) 8.9 2.13 1/1/07 850,048 2,040,150
Bradley N. Ross......... 602,400(3) 8.9 2.13 1/1/07 850,048 2,040,150
Richard D. Spurr........ 440,000(4) 6.5 2.13 1/1/07 588,016 1,490,149
</TABLE>
- --------
(1) The exercise prices represent the fair market value of the Common Stock on
the respective dates of grant, as determined by the Board of Directors.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth. Actual gains, if any,
on stock option exercises and Common Stock holdings are dependent on the
timing of such exercise and the future performance of the Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that the amounts reflected will be received by
the individuals.
(3) Each of the indicated options cumulatively vests as to one-fifth of the
underlying shares on January 1, 1997 and each of the first, second, third
and fourth anniversaries of January 1, 1997.
(4) The indicated option cumulatively vests as to one-fifth of the underlying
shares on July 23, 1997 and each of the first, second, third and fourth
anniversaries of July 23, 1997.

51
<PAGE>

FISCAL YEAR-END OPTION VALUES

The following table sets forth certain information concerning the number and
value of unexercised options held by each of the Named Executive Officers on
December 31, 1997. None of the Named Executive Officers exercised options
during the year ended December 31, 1997.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT FISCAL YEAR END FISCAL YEAR-END(2)
---------------------------- -------------------------
NAME EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John A. Ryan............. 578,320 867,480 $7,442,978 $11,164,468
Brian O'Higgins.......... 240,960 361,440 3,101,155 4,651,733
Bradley N. Ross.......... 240,960 361,440 3,101,155 4,651,733
Richard D. Spurr......... 88,000 352,000 1,132,560 4,530,240
</TABLE>
- --------
(1) Includes shares that became exercisable as of January 1, 1998.

(2) There was no public trading market for the Common Stock as of December 31,
1997. Accordingly, these values have been calculated on the basis of the
assumed initial public offering price of $15.00 per share, less the
applicable exercise price.

EMPLOYMENT AGREEMENTS

Pursuant to a letter agreement between John A. Ryan and the Company, dated
as of April 21, 1997, the Company agreed to employ Mr. Ryan as the Company's
President and Chief Executive Officer, with an annual salary of $185,000 and
an annual bonus of up to 35% of the base salary. The Company also agreed to
reimburse up to $35,000 of expenses related to executive perquisites in
Mr. Ryan's first year of employment as President and Chief Executive Officer,
and up to $12,000 for such expenses in each subsequent year of employment. Mr.
Ryan will receive a relocation assistance payment of up to $100,000 if he is
required to relocate his residence due to the relocation of the Company's
headquarters. If Mr. Ryan's employment is terminated by the Company within two
years of such a relocation, for any reason other than for cause, disability,
retirement, resignation or death, then Mr. Ryan is entitled to payment of his
base salary for up to 36 weeks. Mr. Ryan's employment is terminable at will.

Pursuant to a letter agreement between Brian O'Higgins and NTL, on behalf of
the Company, dated as of November 18, 1996, the Company agreed to employ Mr.
O'Higgins as the Company's Executive Vice President, Technology, with an
annual salary of CDN$130,000. Mr. O'Higgins was appointed as the Company's
Executive Vice President and Chief Technology Officer in December 1996, and in
September 1997 his annual salary was increased to CDN$160,000. Upon
termination of his employment without just cause, Mr. O'Higgins will be
entitled to payment of his base salary for 12 months, plus an allowance of
CDN$10,000 for benefits. Mr. O'Higgins has agreed not to compete against the
Company for 12 months following the termination of his employment with the
Company.

Pursuant to a letter agreement between Bradley N. Ross and NTL, on behalf of
the Company, dated as of November 18, 1996, the Company agreed to employ Mr.
Ross as the Company's Executive Vice President, Marketing and Product Line
Management, with an annual salary of CDN$130,000. Mr. Ross currently serves as
the Company's President of European Operations. In September 1997, Mr. Ross'
annual salary was increased to CDN$160,000. Upon termination of his employment
without just cause, Mr. Ross will be entitled to payment of his base salary
for 12 months, plus an allowance of CDN$10,000 for benefits. Mr. Ross has
agreed not to compete against the Company for 12 months following the
termination of his employment with the Company.

52
<PAGE>

Pursuant to a letter agreement between Richard D. Spurr and the Company,
dated as of June 4, 1997, the Company agreed to employ Mr. Spurr as the
Company's Vice President of Global Sales, with an annual salary of $125,000.
Mr. Spurr currently serves as the Company's Senior Vice President, Sales and
Marketing. Mr. Spurr is also eligible to receive up to $125,000 through the
Company's sales incentive program. Mr. Spurr's employment is terminable at
will.

STOCK PLANS

AMENDED AND RESTATED 1996 STOCK INCENTIVE PLAN

The Company's Amended and Restated 1996 Stock Incentive Plan (the "Incentive
Plan") was adopted by the Board of Directors and approved by the stockholders
of the Company in December 1996. The Incentive Plan was amended and restated
by the Board in June 1998, and such amendment and restatement was approved by
the stockholders in July 1998. The Incentive Plan was further amended by the
Board of Directors in July 1998. Up to 9,600,000 shares of Common Stock
(subject to adjustment in the event of stock splits and other similar events)
may be issued pursuant to awards granted under the Incentive Plan.

The Incentive Plan provides for the grant of incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), nonstatutory stock options, restricted stock awards and
other stock-based awards (collectively, "Awards").

Officers, employees, directors, consultants and advisors of the Company and
its subsidiaries (collectively, "Participants") are eligible to receive Awards
under the Incentive Plan, provided such consultants render bona fide services
not in connection with an offer or sale of securities in a capital raising
transaction. Under present law, however, incentive stock options may only be
granted to employees of the Company or its subsidiaries. The maximum number of
shares with respect to which an Award may be granted to any Participant under
the Incentive Plan may not exceed 5,000,000 shares per calendar year.

Participants who are granted options under the Incentive Plan receive the
right to purchase a specified number of shares of Common Stock at a specified
option price and subject to such other terms and conditions as are specified
in connection with the option grant. Options may be granted at an exercise
price which may be less than, equal to or greater than the fair market value
of the Common Stock on the date of grant. Under present law, incentive stock
options and options intended to qualify as performance-based compensation
under Section 162(m) of the Code may not be granted at an exercise price less
than the fair market value of the Common Stock on the date of grant (or less
than 110% of the fair market value in the case of incentive stock options
granted to optionees holding more than 10% of the voting power of the
Company). The Incentive Plan permits the Board of Directors to determine the
manner of payment of the exercise price of options, including payment by cash,
check or in connection with a "cashless exercise" through a broker, by
surrender to the Company of shares of Common Stock, by delivery to the Company
of a promissory note or by any combination of the permitted forms of payment.

The Incentive Plan is administered by the Board of Directors. The Board of
Directors has the authority to adopt, amend and repeal the administrative
rules, guidelines and practices relating to the Incentive Plan and to
interpret the provisions thereof. Pursuant to the terms of the Incentive Plan,
the Board of Directors may delegate authority under the Incentive Plan to one
or more committees of the Board of Directors and, subject to certain
limitations, to one or more executive officers of the Company. The Board of
Directors has authorized the Compensation Committee to administer the
Incentive Plan, including the granting of options to executive officers.
Subject to any applicable limitations contained in the Incentive Plan, the
Board of Directors, the Compensation Committee or any other committee or
executive officer to whom the Board of Directors delegates authority, as the

53
<PAGE>

case may be, selects the recipients of Awards and determines (i) the number of
shares of Common Stock covered by options and the dates upon which such
options become exercisable, (ii) the exercise price of options, (iii) the term
of options and (iv) the number of shares of Common Stock subject to any
restricted stock or other stock-based Awards and the terms and conditions of
such Awards, including any conditions for repurchase, the issue price and
repurchase price.

In the event of a merger, liquidation or other Acquisition Event (as defined
in the Incentive Plan), the Incentive Plan authorizes the Board of Directors
to provide (i) that outstanding options be assumed or substituted by the
succeeding corporation, (ii) that unexercised options become exercisable in
full immediately prior to the consummation of the Acquisition Event, (iii) for
a cash payment to holders of outstanding options, followed by the termination
of such options, in certain circumstances, (iv) that all restricted stock
awards become free of all restrictions prior to the consummation of the
Acquisition Event or (v) that other stock-based Awards (x) become exercisable,
realizable or vested in full immediately prior to the consummation of the
Acquisition Event or (y) be assumed or substituted by the succeeding
corporation.

No Award may be granted under the Incentive Plan after December 2006, but
the vesting and effectiveness of Awards previously granted may extend beyond
that date. The Board of Directors may at any time amend, suspend or terminate
the Incentive Plan, except that no Award granted after an amendment of the
Incentive Plan and designated as subject to Section 162(m) of the Code by the
Board of Directors shall become exercisable, realizable or vested (to the
extent such amendment was required to grant such Award) unless and until such
amendment is approved by the Company's stockholders.

1998 EMPLOYEE STOCK PURCHASE PLAN

The Company's 1998 Employee Stock Purchase Plan (the "Purchase Plan") was
adopted by the Board of Directors in July 1998. The Purchase Plan authorizes
the issuance of up to a total of 400,000 shares of Common Stock to
participating employees.

All employees of the Company, including directors of the Company who are
employees, and all employees of any participating subsidiaries whose customary
employment is more than 20 hours per week and more than five months in any
calendar year are eligible to participate in the Purchase Plan. Employees who
would immediately after the grant own 5% or more of the total combined voting
power or value of the stock of the Company or any subsidiary are not eligible
to participate. As of June 30, 1998, approximately 295 of the Company's
employees would have been eligible to participate in the Purchase Plan.

On the first day of a designated payroll deduction period (the "Offering
Period"), the Company will grant to each eligible employee who has elected to
participate in the Purchase Plan an option to purchase shares of Common Stock
as follows: the employee may authorize a payroll deduction in any dollar
amount up to a maximum of 10% of such employee's base pay to be deducted by
the Company from such employee's base pay during the Offering Period. On the
last day of the Offering Period, the employee is deemed to have exercised the
option, at the option exercise price, to the extent of accumulated payroll
deductions. Under the terms of the Purchase Plan, the option exercise price
per share is an amount equal to 90%, or such other percentage as may be
determined by the Board of Directors consistent with the requirements of the
Code, of the fair market value of the Common Stock on either the first day or
the last day of the Offering Period, whichever is lower. Such fair market
value shall be determined by the Board of Directors in a manner consistent
with the requirements of the Code. In no event may an employee purchase in any
one Offering Period a number of shares which exceeds the number of shares
determined by dividing (i) the product of $2,083 and the number of whole
months in such Offering Period by (ii) the closing price on the commencement
date of the Offering Period or such other number as may be determined by the
Board

54
<PAGE>

of DIrectors prior to such commencement date. The Compensation Committee may,
in its discretion, choose an Offering Period of 12 months or less for each
offering and choose a different offering Period for each Offering.

If an employee is not a participant on the last day of the Offering Period,
such employee is not entitled to exercise any option, and the amount of such
employee's accumulated payroll deductions will be refunded. An employee's
rights under the Purchase Plan terminate upon voluntary withdrawal from the
Purchase Plan at any time, or when such employee ceases employment for any
reason, except that upon termination of employment because of death, the
balance in the employee's account shall be paid to the employee's beneficiary.
An employee may at any time prior to the close of business on the last day in
an Offering Period withdraw from the offering and draw out the entire balance
accumulated in the employee's account. Partial withdrawals are not permitted.
The employee may not begin participation again during the remainder of the
Offering Period, but may participate in any subsequent offering in accordance
with terms and conditions established by the Board or the Compensation
Committee. Rights under the Purchase Plan are not transferable by an employee
other than by will or the laws of descent and distribution.

The Purchase Plan terminates on July 21, 2000 or such earlier date as the
Board determines. Upon termination of the Purchase Plan all amounts in the
accounts of participating employees will be promptly refunded.

Because participation in the Purchase Plan is voluntary, the Company cannot
presently determine the number of shares of Common Stock to be purchased by
any particular current executive officer, by all current executive officers as
a group or by non-executive employees as a group.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Archibald and Morris served during the year ended December 31, 1997
as members of the Compensation Committee of the Board of Directors. No
executive officer of the Company has served as director or member of the
compensation committee (or other committee serving an equivalent function) of
any other entity, any of whose executive officers serve as a director of or
member of the Compensation Committee of the Board of Directors. See "Certain
Transactions" for a description of transactions between the Company and
affiliates of Mr. Archibald.

55
<PAGE>

CERTAIN TRANSACTIONS

In connection with the incorporation and financing of the Company in
December 1996 and January 1997 (the "Financing"), the Company entered into an
asset transfer agreement with NTI (the "NTI Transfer Agreement"). In addition,
the Canadian Subsidiary entered into an asset transfer agreement with NTL (the
"NTL Transfer Agreement"). Messrs. Archibald, Conner and Dunn are officers of
Nortel, and, as Mr. Conner's compensation from Nortel is based in part upon
the Company's results of operations, Mr. Conner may be deemed to have an
indirect material interest in the transactions between the Company and Nortel.

Under the NTI Transfer Agreement, NTI received 20,300,000 shares of Common
Stock, an unsecured demand note in the amount of $8.0 million and the
assumption of certain liabilities by the Company in consideration for the
transfer to the Company of an exclusive license to exploit the intellectual
property rights transferred to the Canadian Subsidiary within the United
States, NTI's interest in executory contracts with distributors and customers
licensing Entrust products, equipment used by employees and contractors
dedicated to the Company's business and the records relating to the Company's
business. Prior to the execution of the NTI Transfer Agreement, the Company
was a division of Nortel and all of the officers of the Company were employees
of Nortel. Accordingly, the purchase price was not arrived at by an arm's-
length negotiation between Nortel and the Company. Rather, as part of the
Financing, Nortel valued the transaction according to the net book value of
the assets being transferred.

Under the NTL Transfer Agreement, NTL received 7,700,000 Exchangeable
Special Shares of the Canadian Subsidiary (which stock is convertible into
shares of the Common Stock of the Company), one share of common stock of the
Canadian Subsidiary and the assumption of certain liabilities by the Company
in exchange for NTL's worldwide intellectual property rights underlying the
Entrust products (subject to the license of NTI and certain exceptions, see
"Business--Intellectual Property"), the inventory of the Company's business,
all executory contracts with suppliers, distributors and customers licensing
Entrust products (other than NTI's interest therein), and all personal
property and fixtures used by its employees and contractors dedicated to the
Company's business (other than NTI employees and contractors). Prior to the
execution of the NTL Transfer Agreement, the Company was a division of Nortel
and all of the officers of the Company were employees of Nortel. Accordingly,
the purchase price was not arrived at by an arm's-length negotiation between
Nortel and the Company. Rather, as part of the Financing, Nortel valued the
transaction according to the net book value of the assets being transferred.
The Company also issued 7,700,000 shares of Special Voting Stock to NTL in
connection with this transaction. Pursuant to the terms of the Articles of
Incorporation of the Canadian Subsidiary, a holder of Exchangeable Special
Shares may exchange such shares for Common Stock at any time, on a one-for-one
basis, by delivering the certificates representing the Exchangeable Shares
together with certificates representing an equal number of shares of Special
Voting Stock to the Canadian Subsidiary. NTL received Exchangeable Special
Shares from the Canadian Subsidiary and shares of Special Voting Stock from
the Company in order to minimize Canadian taxes at the time of NTL's
contribution of assets under the NTL Transfer Agreement.

The Company entered into a strategic alliance agreement (the "Strategic
Alliance Agreement") pursuant to which it granted to NTL for three years, or
as long as the Company is controlled by NTL, whichever is longer, the right to
distribute Entrust products on terms no less favorable to NTL than the terms
of the agreements then in effect with other resellers of the Company. The
Company granted to NTL for three years, or as long as the Company is
controlled by NTL, whichever is longer, a royalty-bearing license to use and
modify the Company's source code in NTL products on terms no less favorable to
NTL than those offered to other source code licensees. NTL granted to the
Company and the Company granted to NTL world-wide, royalty-free licenses to
use, sell or license any of the grantor's products or services, excluding
existing exclusive licenses, until the grant expires or NTL

56
<PAGE>

ceases to control the Company, whichever comes first. In addition, NTL may
restrict the Company, for so long as NTL maintains beneficial ownership of a
majority of the voting power of the Company, from any act which may reasonably
be anticipated to contravene any material instrument binding on Nortel, any
order of any governmental body which has jurisdiction over Nortel or any of
its assets, or any applicable law or regulation. Upon the closing of the
Offerings, Nortel will beneficially own approximately 56.4% of the Company's
Common Stock. See "Risk Factors --Concentration of Ownership".

In connection with the Financing, the Company and NTL entered into an
intercompany services and operating agreement (the "Services Agreement") with
respect to services offered by NTL to the Company. The Services Agreement
provides that such services will be provided in exchange for fees (based upon
allocation of its current costs for such services not to exceed fair market
value), which management of the Company believes are substantially consistent
with the allocation of the costs of such services set forth in the historical
financial statements of the Company. The Company paid $2.9 million, $3.7
million and $273,000 in the years ended December 31, 1995, 1996 and 1997,
respectively, for research and development services provided by Bell Northern
Research Ltd., a subsidiary of Nortel. During the year ended December 31,
1997, the Company paid Nortel $299,000 for services rendered and reimbursed
Nortel $5.6 million for expenses paid by Nortel on behalf of the Company, net
of revenues collected by Nortel on the Company's behalf.

In connection with the Financing, in January 1997, the Company sold 257,500
shares of Series B Common Stock to a group of private investors for an
aggregate sale price of $25,750,000. In January 1997, the Company also sold
2,500 shares of Series B Non-Voting Common Stock to a private investor for an
aggregate sale price of $250,000 and issued an additional 36,448 shares of
Series B Non-Voting Common Stock to such investor in exchange for an
equivalent number of shares of Series B Common Stock.

The Company has adopted a policy providing that all material transactions
between the Company and its officers, directors and other affiliates must (i)
be approved by a majority of the members of the Company's Board of Directors
and by a majority of the disinterested members of the Company's Board of
Directors and (ii) be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties.

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<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock of the Company as of June 30, 1998, by (i) each
person or entity known to the Company to own beneficially more than 5% of the
Common Stock, (ii) each of the directors of the Company, (iii) each of the
Named Executive Officers, (iv) each of the Selling Stockholders and (v) all
directors and executive officers as a group. Unless otherwise indicated, each
person or entity named in the table has sole voting power and investment power
(or shares such power with his or her spouse) with respect to all shares of
capital stock listed as owned by such person or entity.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY NUMBER OF SHARES TO BE
OWNED PRIOR SHARES OFFERED BENEFICIALLY OWNED
TO OFFERINGS(1) FOR SALE(2) AFTER OFFERINGS(1)(2)
--------------------- -------------- ---------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Northern Telecom
Limited(3)............. 28,000,000 66.3% 1,150,520 26,849,480 56.4%
8200 Dixie Road, Suite
100
Brampton, Ontario L6T
5P6
Olympus Partners(4)..... 5,032,053 11.9 206,459 4,825,594 10.1
Metro Center, 1 Station
Place
Stamford, CT 06902
Morgan Guaranty Trust
Company of
New York as Trustee,
and/or Investment
Manager and/or
Agent(5)............... 3,517,186 8.3 144,521 3,372,665 7.1
522 Fifth Avenue
New York, NY 10036
Societe Generale
Investment
Corporation(6)......... 2,512,276 5.9 103,229 2,409,047 5.1
1221 Avenue of the
Americas
New York, NY 10020
Orchid & Co., nominee
for T. Rowe Price
Threshold Fund III,
L.P.(7)................ 1,507,366 3.6 61,938 1,445,428 3.0
John A. Ryan(8)......... 578,320 1.4 -- 578,320 1.2
Brian O'Higgins(9)...... 240,960 * -- 240,960 *
Bradley N. Ross(10)..... 240,960 * -- 240,960 *
Richard D. Spurr(11).... 176,000 * -- 176,000 *
David D. Archibald...... -- * -- -- *
F. William Conner....... -- * -- -- *
Frank A. Dunn........... -- * -- -- *
Robert S. Morris(12).... 5,032,053 11.9 206,459 4,825,594 10.1
All executive officers
and directors as a
group (10
persons)(13)........... 6,308,293 14.5 206,459 6,101,834 12.5
</TABLE>
- --------
* Less than 1%

(1) The number of shares of Common Stock outstanding prior to the Offerings
includes (i) 42,243,164 shares of Common Stock outstanding as of June 30,
1998 and (ii) with respect to each person, the shares issuable by the
Company pursuant to options held by such persons which may be exercised
within 60 days following June 30, 1998 ("Presently Exercisable Options").
The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and
the information is not necessarily indicative of beneficial ownership for
any other purpose. Under such rules, beneficial ownership includes any
shares as to which the individual or entity has sole or shared voting

58
<PAGE>

power or investment power and any shares as to which the individual or
entity has the right to acquire beneficial ownership within 60 days after
June 30, 1998 through the exercise of any stock option, warrant or other
right. The inclusion herein of such shares, however, does not constitute
an admission that the named stockholder is a direct or indirect beneficial
owner of such shares.

(2) Assumes no exercise of the Underwriters' over-allotment option.

(3) The number of shares of Common Stock deemed outstanding prior to the
Offerings consists of (i) 20,300,000 shares held of record by NTI and
(ii) 7,700,000 shares of Common Stock issuable upon the exchange of
Exchangeable Shares of the Canadian Subsidiary. The number of shares of
Common Stock offered for sale consists of 1,150,520 shares of Common
Stock issuable upon the exchange of Exchangeable Shares of the Canadian
Subsidiary offered for sale by NTL. NTL beneficially owns, and has sole
voting and investment power with respect to, the shares of Common Stock
held of record by NTI. Exchangeable Shares may be exchanged at any time
for Common Stock. See "Certain Transactions". In addition to the number
of shares shown as offered for sale in the table, NTL has granted the
Underwriters the right to purchase up to an additional 799,916 shares
pursuant to the Underwriters' over-allotment option.

(4) The number of shares of Common Stock deemed outstanding prior to the
Offerings consists of (i) 50,245 shares held of record by Olympus
Executive Fund, L.P., a Delaware limited partnership ("Olympus
Executive"), (ii) 4,974,308 shares held of record by Olympus Growth Fund
II, L.P., a Delaware limited partnership ("Olympus Growth", and with
Olympus Executive, the "Olympus Funds"), and (iii) 7,500 shares subject
to Presently Exercisable Options granted to Robert S. Morris. The number
of shares of Common Stock offered for sale consists of (i) 2,065 shares
offered for sale by Olympus Executive and (ii) 204,394 shares offered for
sale by Olympus Growth. Olympus Partners may be deemed to have or share
voting and investment power with respect to all shares of Common Stock
held of record by the Olympus Funds. Shares subject to Presently
Exercisable Options held of record by Robert S. Morris, the managing
partner of Olympus Partners, are assignable to Olympus Growth. In
addition to the number of shares shown as offered for sale in the table,
Olympus Executive and Olympus Growth have granted the Underwriters the
right to purchase up to an additional 447 shares and 44,322 shares,
respectively, pursuant to the Underwriters' over-allotment option.

(5) The number of shares of Common Stock deemed outstanding prior to the
Offerings consists of (i) 2,743,406 shares held of record by Morgan
Guaranty Trust Company of New York, as Trustee of the Commingled Pension
Trust Fund (Multi-Market Special Investment Fund II) of Morgan Guaranty
Trust Company of New York ("Morgan Trust I"), (ii) 386,890 shares held of
record by Morgan Guaranty Trust Company of New York as Trustee of the
Multi-Market Special Investment Trust Fund of Morgan Guaranty Trust
Company of New York ("Morgan Trust II") and (iii) 386,890 shares held of
record by Morgan Guaranty Trust Company of New York, as Investment
Manager and Agent for a private client ("Morgan Trust III"). The number
of shares of Common Stock offered for sale consists of (i) 112,727 shares
offered for sale by Morgan Trust I, (ii) 15,897 shares offered for sale
by Morgan Trust II and (iii) 15,897 shares offered for sale by Morgan
Trust III. In addition to the number of shares shown as offered for sale
in the table, Morgan Trust I, Morgan Trust II and Morgan Trust III have
granted the Underwriters the right to purchase up to an additional 78,374
shares, 11,053 shares and 11,053 shares, respectively, pursuant to the
Underwriters' over-allotment option.

(6) In addition to the number of shares shown as offered for sale in the
table, Societe Generale Investment Corporation has granted the
Underwriters the right to purchase up to an additional 71,772 shares
pursuant to the Underwriters' over-allotment option.

(7) In addition to the number of shares shown as offered for sale in the
table, Orchid & Co. has granted the Underwriters the right to purchase up
to an additional 43,063 shares pursuant to the Underwriters' over-
allotment option.

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<PAGE>

(8) Consists of 578,320 shares subject to Presently Exercisable Options.

(9) Consists of 240,960 shares subject to Presently Exercisable Options.

(10) Consists of 240,960 shares subject to Presently Exercisable Options.

(11) Consists of 176,000 shares subject to Presently Exercisable Options.

(12) The number of shares of Common Stock deemed outstanding prior to the
Offerings consists of (i) 5,024,553 shares held of record by the Olympus
Funds and (ii) 7,500 shares subject to Presently Exercisable Options. The
number of shares of Common Stock offered for sale consists of 206,459
shares offered for sale by the Olympus Funds. Mr. Morris, the managing
partner of Olympus Partners, may be deemed to have or share voting and
investment power with respect to all shares of Common Stock held of
record by the Olympus Funds. Mr. Morris disclaims beneficial ownership of
all shares held of record by the Olympus Funds. In addition to the number
of shares shown as offered for sale in the table, the Olympus Funds have
granted the Underwriters the right to purchase up to an additional 44,769
shares pursuant to the Underwriters' over-allotment option.

(13) The number of shares of Common Stock deemed outstanding prior to the
Offerings consists of (i) 5,024,553 shares held of record by the Olympus
Funds and (ii) 1,283,740 shares subject to Presently Exercisable Options.
The number of shares of Common Stock offered for sale consists of 206,459
shares offered for sale by the Olympus Funds. In addition to the number
of shares shown as offered for sale in the table, the Olympus Funds have
granted the Underwriters the right to purchase up to an additional 44,769
shares pursuant to the Underwriters' over-allotment option. See footnotes
(8)--(12) above.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, 15,000,000 shares of special voting stock, $.01 par value per
share ("Special Voting Stock"), and 5,000,000 shares of preferred stock, $.01
par value per share ("Preferred Stock"). As of June 30, 1998, there were
34,543,164 shares of Common Stock outstanding held by 22 stockholders and
7,700,000 shares of Special Voting Stock held by one stockholder. Upon the
closing of the Offerings there will be 40,259,557 shares of Common Stock,
6,549,480 shares of Special Voting Stock and no shares of Preferred Stock
outstanding.

The following summary of certain provisions of the Company's Common Stock,
Special Voting Stock, Preferred Stock, Articles of Incorporation and Bylaws is
materially complete but is qualified by reference to the provisions of
applicable law and to the Company's Amended and Restated Articles of
Incorporation (the "Articles of Incorporation"), Amended and Restated Bylaws
(the "Bylaws") and other agreements included as exhibits to the Registration
Statement of which this Prospectus is a part. See "Additional Information".

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor, subject to any preferential dividend rights of
outstanding Preferred Stock. Upon the dissolution or liquidation of the
Company, subject to the prior rights of any outstanding Preferred Stock, the
holders of Common Stock are entitled to receive ratably the net assets of the
Company available after the payment of all debts and other liabilities.
Holders of Common Stock have no preemptive, subscription or redemption rights.
The outstanding shares of Common Stock are, and the shares of Common Stock
offered by the Company in the Offerings will be, when issued and paid for,
fully paid and nonassessable. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of Preferred Stock which the
Company may designate and issue in the future. Certain holders of Common Stock
have the right to require the Company to effect the registration of their
shares of Common Stock in certain circumstances. See "--Registration Rights".

At present, there is no established trading market for the Common Stock.
Application has been made for the quotation of the Common Stock on the Nasdaq
National Market under the symbol "ENTU".

SPECIAL VOTING STOCK

The holders of Special Voting Stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Except for such voting rights, the holders of
Special Voting Stock have no other rights in respect of such shares, including
without limitation rights to receive dividends or rights to receive assets of
the Company upon its dissolution, liquidation or winding up of its affairs.

In connection with the incorporation of the Canadian Subsidiary and the
Company, NTL was issued Exchangeable Shares of the Canadian Subsidiary. The
holder of Exchangeable Shares may exchange such shares for shares of the
Company's Common Stock at any time on or prior to December 31, 2006, on a one-
for-one basis. In addition, the Company generally has the right to demand such
exchange at any time on or prior to December 31, 2006. See "Certain
Transactions".

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<PAGE>

PREFERRED STOCK

Under the terms of the Articles of Incorporation, the Board of Directors is
authorized, subject to any limitations prescribed by law, without stockholder
approval, to issue up to 5,000,000 shares of Preferred Stock in one or more
series. Each such series of Preferred Stock shall have such rights,
preferences, privileges and restrictions, including voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences,
as shall be determined by the Board of Directors. The purpose of authorizing
the Board of Directors to issue Preferred Stock and determine its rights and
preferences is to eliminate delays associated with a stockholder vote on
specific issuances. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from acquiring, a majority of the
outstanding voting stock of the Company. The Company has no present plans to
issue any shares of Preferred Stock.

MARYLAND LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

Under Section 3-601 et seq. of the General Corporation Law of Maryland (the
"Maryland Law") (the "Business Combination Statute"), to which the Company is
subject, certain "business combinations" (including mergers or similar
transactions subject to a statutory stockholder vote and additional
transactions involving transfers of assets or securities in specific amounts)
between a Maryland corporation subject to the Business Combination Statute and
(i) any person who beneficially owns, directly or indirectly, 10% or more of
the voting power of the corporation's outstanding voting shares after the date
on which the corporation had 100 or more beneficial owners of its stock or
(ii) any affiliate or associate of the corporation who, at any time within the
preceding two years and after the date on which the corporation had 100 or
more beneficial owners of its stock, was the beneficial owner, directly or
indirectly, of 10% or more of the voting power of the then-outstanding voting
stock of the corporation (an "Interested Stockholder"), or an affiliate
thereof, are prohibited for five years after the most recent date on which the
Interested Stockholder became an Interested Stockholder unless an exemption is
available. Thereafter, any such business combination must be recommended by
the board of directors of the corporation and approved by the affirmative vote
of at least: (i) 80% of the votes entitled to be cast by all holders of
outstanding voting shares of the corporation; and (ii) two-thirds of the votes
entitled to be cast by holders of outstanding voting shares of the corporation
other than shares held by the Interested Stockholder with whom the business
combination is to be effected, unless the corporation's stockholders receive a
minimum price (as described in the Business Combination Statute) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Stockholder for its shares. The Business
Combination Statute does not apply, however, to business combinations that are
(a) exempted in the corporation's charter prior to the time the corporation
became subject to the Business Combination Statute or (b) approved or exempted
by the board of directors prior to the time that the Interested Stockholder
becomes an Interested Stockholder. After a corporation becomes subject to the
Business Combination Statute, in order to amend the corporation's charter to
elect not to be subject to the foregoing requirements with respect to one or
more Interested Stockholders, the affirmative vote of at least 80% of the
votes entitled to be cast by all holders of outstanding shares of voting stock
and two-thirds of the votes entitled to be cast by holders of outstanding
shares of voting stock who are not Interested Stockholders is required. The
Company's Articles of Incorporation provide that business combinations between
the Company and any of NTL, NTI, affiliates of NTL or NTI, or the successors
or assigns of NTL, NTI or their affiliates are exempt from the provisions of
the Business Combination Statute.

Section 3-701 et seq. of the Maryland Law (the "Control Share Acquisition
Statute") provides that "control shares" of a Maryland corporation acquired in
a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror or by officers or
directors who are

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<PAGE>

employees of the corporation. The Company's Articles of Incorporation
generally exempt the applicability of the Control Share Acquisition Statute to
any control share acquisition of any shares of the capital stock of the
Company.

The Business Combination Statute and the Control Share Acquisition Statute
could have the effect of discouraging takeover proposals and delaying or
preventing a change of control of the Company not approved by its Board of
Directors.

The Articles of Incorporation provide for the division of the Board of
Directors into three classes as nearly equal in size as possible with
staggered three-year terms. See "Management--Executive Officers and
Directors". The Articles of Incorporation also provide that directors may be
removed only for cause by the affirmative vote of the holders of two-thirds of
the shares of capital stock of the Company entitled to vote. Under the
Articles of Incorporation, any vacancy on the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the Board of
Directors, may only be filled by vote of a majority of the directors then in
office. The limitations on the removal of directors and filling of vacancies
could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from acquiring, control of the
Company.

Maryland Law provides generally that the affirmative vote of two-thirds or a
majority of the shares entitled to vote on any matter is required to amend a
corporation's articles of incorporation unless a corporation's articles of
incorporation requires a greater percentage. The Company's Articles of
Incorporation require the affirmative vote of the holders of at least 75% of
the shares of capital stock of the Company issued and outstanding and entitled
to vote to amend or repeal any of the provisions described in the previous
paragraph.

The Articles of Incorporation also provide that any action required or
permitted to be taken by the stockholders of the Company at an annual meeting
of stockholders may only be taken if it is properly brought before such
meeting. The Bylaws further provide that special meetings of the stockholders
may only be called by the President, the Board of Directors or the Secretary
upon the request of 50% of the shares of capital stock of the Company entitled
vote. Under the Bylaws, in order for any matter to be considered "properly
brought" before an annual meeting, a stockholder must comply with certain
requirements regarding advance notice to the Company. These provisions may
discourage another person or entity from making a tender offer for the Common
Stock, because such person or entity, unless it acquired at least 50% of the
outstanding voting securities of the Company, would be able to take action as
a stockholder (such as electing new directors or approving a merger) only at
the annual meeting of stockholders.

The Articles of Incorporation contain certain provisions permitted under the
Maryland Law relating to the liability of directors and officers. The
provisions eliminate a director's or officer's liability for monetary damages
to a corporation or its stockholders, except to the extent the director or
officer actually received an improper benefit or profit or the director's or
officer's action was the result of active and deliberate dishonesty. Further,
the Articles of Incorporation contain provisions to indemnify the Company's
directors and officers to the fullest extent permitted by the Maryland Law.
The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as directors.

REGISTRATION RIGHTS

Pursuant to an Amended and Restated Registration Rights Agreement (the
"Registration Rights Agreement") among the Company, NTI, NTL (NTL and NTI
collectively referred to as the "Nortel Stockholders") and certain of its
stockholders (the "Investors", and with the Nortel Stockholders, the
"Rightsholders"), such Rightsholders will be entitled to certain rights with
respect to the registration under the Securities Act of a total of
approximately 39,397,169 shares of Common Stock (the "Registrable Shares").

63
<PAGE>

The Nortel Stockholders as well as Investors holding in the aggregate at
least 35% of the Registrable Shares initially held by all Investors may each
require the Company to prepare and file a registration statement under the
Securities Act with respect to their Registrable Shares if such registration
would result in an offering with an aggregate offering price of at least $5.0
million. The Nortel Stockholders and the Investors are entitled to three and
two demand registration requests, respectively. The Company is not required to
file a demand registration statement for one year following the effective date
of the Offerings or within six months after the effective date of any other
registration statement, subject to certain restrictions.

If the Company proposes to register any of its securities under the
Securities Act, the Rightsholders will be entitled to include Registrable
Shares in such offering, subject to the right of the managing underwriter of
any underwritten offering to limit for marketing reasons the number of shares
of Registrable Shares included in the offering. See "Shares Eligible for
Future Sale".

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be American
Securities Transfer & Trust, Inc.

64
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offerings, there has been no public market for the securities
of the Company. Upon completion of the Offerings there will be 47,643,164
shares of Common Stock of the Company outstanding (assuming no exercise of the
outstanding options of the Company). Of these shares, the 7,066,667 shares
sold in the Offerings will be freely tradeable without restriction or further
registration under the Securities Act, except that any shares purchased by
"affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144")
under the Securities Act ("Affiliates"), may generally only be sold in
compliance with the limitations of Rule 144 described below.

The remaining 40,576,497 shares of Common Stock are deemed "restricted
securities" under Rule 144 and are all subject to the Lock-Up Agreements with
the Representatives of the Underwriters. Upon expiration of the Lock-Up
Agreements 180 days after the date of this Prospectus (and assuming no
exercise of outstanding options or exchange of Exchangeable Shares),
approximately 39,397,169 shares of restricted Common Stock will be available
for sale in the public market, subject to the provisions of Rule 144 under the
Securities Act.

The Company and all of its directors, officers, stockholders, who in the
aggregate will hold approximately 40,576,497 shares of Common Stock on the
date of this Prospectus, as well as holders of options to purchase Company
Common Stock, have agreed, pursuant to Lock-Up Agreements with the
Representatives of the Underwriters or, in the case of the option holders,
pursuant to stock option agreements with the Company, that, without the prior
written consent of Goldman, Sachs & Co., for a period of 180 days after the
date of this Prospectus, they will not offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock, or any shares convertible
into or exchangeable for shares of Common Stock, owned directly by such
persons or with respect to which they have the power of disposition. Goldman,
Sachs & Co. may release all or part of the shares subject to the Lock-Up
Agreements at any time in its sole discretion.

In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the Registration Statement of which this Prospectus is a
part, a stockholder, including an Affiliate, who has beneficially owned his or
her restricted securities (as that term is defined in Rule 144) for at least
one year from the later of the date such securities were acquired from the
Company or (if applicable) the date they were acquired from an Affiliate is
entitled to sell, within any three-month period, a number of such shares that
does not exceed the greater of 1% of the then outstanding shares of Common
Stock (approximately 476,432 shares immediately after the Offerings) or the
average weekly trading volume in the Common Stock during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule
144, provided certain requirements concerning availability of public
information, manner of sale and notice of sale are satisfied. In addition,
under Rule 144(k), if a period of at least two years has elapsed between the
later of the date restricted securities were acquired from the Company or (if
applicable) the date they were acquired from an Affiliate of the Company, a
stockholder who is not an Affiliate of the Company at the time of sale and has
not been an Affiliate of the Company for at least three months prior to the
sale is entitled to sell the shares immediately without compliance with the
foregoing requirements under Rule 144.

Securities issued in reliance on Rule 701 (such as shares of Common Stock
acquired pursuant to the exercise of certain options granted under the
Company's stock plans) are also restricted securities and, subject to the
Lock-Up Agreements, beginning 90 days after the effective date of the
Registration Statement of which this Prospectus is a part, may be sold by
stockholders other than Affiliates of the Company so long as such sales comply
with the manner of sale provisions of Rule 144 and by Affiliates under Rule
144 without compliance with its one-year holding period requirement.

The Company intends to file registration statements on Form S-8 under the
Securities Act to register all shares of Common Stock issuable under the
Incentive Plan and the Purchase Plan. Shares

65
<PAGE>

issued upon the exercise of stock options after the effective date of the Form
S-8 registration statements will be eligible for resale in the public market
without restriction, subject to Rule 144 limitations applicable to Affiliates
and the Lock-Up Agreements noted above, if applicable.

Prior to the Offerings, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of shares for sale will
have on the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of significant numbers of shares of the Common Stock in
the public market could adversely affect the market price of the Common Stock
and could impair the Company's future ability to raise capital through an
offering of its equity securities.

Pursuant to the Registration Rights Agreement, certain holders of Common
Stock, holding an aggregate of 39,397,169 shares of Common Stock, will have
the ability to require the Company to register their shares of Common Stock,
subject to certain restrictions. See "Description of Capital Stock--
Registration Rights".

66
<PAGE>

CERTAIN U.S. TAX CONSIDERATIONS APPLICABLE TO
NON-U.S. HOLDERS OF THE COMMON STOCK

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
person that, for U.S. federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate
or trust as defined in the U.S. Internal Revenue Code of 1986, as amended (the
"Code") (a "non-U.S. holder"). This discussion does not consider specific
facts and circumstances that may be relevant to a particular non-U.S. holder's
tax position and does not deal with all aspects of United States federal
income and estate taxation that may be relevant to non-U.S. holders (including
special rules applicable to certain United States expatriates), or with U.S.
state and local or non-U.S. tax consequences. Furthermore, the following
discussion is based on provisions of the Code, existing and proposed
regulations promulgated thereunder, and administrative and judicial
interpretations thereof as of the date hereof, all of which are subject to
change, possibly with retroactive effect. Each prospective non-U.S. holder is
urged to consult a tax adviser with respect to the U.S. federal tax
consequences of holding and disposing of Common Stock, as well as any tax
consequences that may arise under the laws of any U.S. state, municipality or
other taxing jurisdiction.

An individual may, among other ways, be deemed to be a resident alien (as
opposed to a non-resident alien) with respect to any calendar year by virtue
of being present in the United States on at least 31 days in such calendar
year and for an aggregate of at least 183 days during the current calendar
year and the two preceding calendar years (counting for such purposes all of
the days present in the current year, one-third of the days present in the
immediately preceding year and one-sixth of the days present in the second
preceding year). Resident aliens are subject to U.S. federal tax as if they
were U.S. citizens.

DIVIDENDS

As described above, the Company does not expect to pay dividends. In the
event the Company does pay dividends, dividends paid to a non-U.S. holder of
Common Stock will be subject to withholding of U.S. federal income tax at a
rate of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable income tax treaty, unless the dividends are
effectively connected with the conduct of a trade or business by the non-U.S.
holder within the United States. Dividends that are effectively connected with
such holder's conduct of a trade or business in the United States are subject
to U.S. federal income tax on a net income basis at applicable graduated
individual or corporate rates, and are not generally subject to withholding,
if the holder complies with certain certification and disclosure requirements.
Any such effectively connected dividends received by a foreign corporation may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty.

Under current law, dividends paid to an address outside the United States
are presumed to be paid to a resident of the country of address (unless the
payer has knowledge to the contrary) for purposes of the withholdings
discussed above and for purposes of determining the applicability of a tax
treaty rate. Under certain recently finalized Treasury Regulations (the "New
Withholding Regulations"), a non-U.S. holder of Common Stock will be required
to satisfy certain certification and other requirements in order to claim the
benefit of a reduced withholding tax rate with respect to dividends under an
applicable treaty. In addition, under the New Withholding Regulations, in the
case of Common Stock held by a foreign partnership, the certification
requirement would generally be applied to the partners and the partnership may
be required to provide certain information, including a United States taxpayer
identification number. The New Withholding Regulations also provide look-
through rules for tiered partnerships. The New Withholding Regulations are
generally effective for payments made after December 31, 1999, subject to
certain transition rules. Non-U.S. holders are

67
<PAGE>

INDEX TO FINANCIAL STATEMENTS

ENTRUST TECHNOLOGIES INC.
CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997 and
June 30, 1998 (unaudited)................................................ F-3
Consolidated Statements of Operations for the years ended December 31,
1995, 1996 and 1997 and the six months ended June 30, 1997 and 1998
(unaudited).............................................................. F-4
Consolidated Statements of Shareholders' Equity (Deficit) for the years
ended December 31, 1995, 1996 and 1997 and the six months ended June 30,
1998 (unaudited)......................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995, 1996 and 1997 and the six months ended June 30, 1997 and 1998
(unaudited).............................................................. F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>

R/3/ SECURITY ENGINEERING AG FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of the Statutory Auditors......................................... F-21
Balance Sheets as of December 31, 1996 and 1997.......................... F-22
Income Statements for the years ended December 31, 1996 and 1997......... F-23
Notes to Financial Statements............................................ F-24

ENTRUST TECHNOLOGIES INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Condensed Consolidated Financial Statements (unaudited)........ F-28
Unaudited Pro Forma Condensed Consolidated Statement of Operations....... F-29
Notes to Pro Forma Condensed Consolidated Financial Statements
(unaudited)............................................................. F-31
</TABLE>

F-1
<PAGE>

AUDITORS' REPORT

To the Directors of Entrust Technologies Inc.

We have audited the consolidated balance sheets of Entrust Technologies Inc.
as at December 31, 1996 and 1997 and the consolidated statements of
operations, shareholders' equity and cash flows for the years ended December
31, 1995, 1996 and 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe our audits provide a
reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of Entrust Technologies Inc. as
at December 31, 1996 and 1997 and the results of its operations and its cash
flows for the years ended December 31, 1995, 1996 and 1997 in conformity with
accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE

June 5, 1998
Ottawa, Canada

F-2
<PAGE>

ENTRUST TECHNOLOGIES INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO
DECEMBER 31, FORMA
--------------- JUNE 30, JUNE 30,
1996 1997 1998 1998
------ ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................. $ -- $ 4,025 $ 2,582 77,012
Short-term investments..................... -- 8,613 1,787 1,787
Accounts receivable (net of allowance for
doubtful accounts at December 31, 1996--
$129, December 31, 1997--$416, and June
30, 1998--$460)........................... 2,487 7,152 10,606 10,606
Other receivables.......................... -- 2,089 1,381 1,381
Prepaid expenses........................... 55 455 616 616
------ ------- ------- -------
Total current assets..................... 2,542 22,334 16,972 91,402
Goodwill.................................... -- -- 3,566 3,566
Property and equipment, net................. 1,145 1,680 2,583 2,583
Deferred income tax benefit................. -- 743 1,031 1,031
------ ------- ------- -------
Total assets............................. $3,687 $24,757 $24,152 $98,582
====== ======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Accounts payable........................... $ 901 $ 1,236 $ 4,106 $ 4,106
Accrued liabilities........................ 945 2,066 3,253 3,253
Deferred income............................ 1,882 3,068 4,669 4,669
Current portion of long-term debt.......... -- -- 11 11
Due to related party....................... -- 2,257 1,795 1,795
------ ------- ------- -------
Total current liabilities................ 3,728 8,627 13,834 13,834
Long-term debt.............................. -- 1,449 19 19
Deferred income tax liabilities............. 19 19 19 19
------ ------- ------- -------
Total liabilities........................ 3,747 10,095 13,872 13,872
------ ------- ------- -------
Redeemable Series A common stock............ -- -- 17,013 --
------ ------- ------- -------
Shareholders' equity (deficit):
Preferred, par value $.01 per share;
5,000,000 authorized; none issued and
outstanding............................... -- -- -- --
Common stock
Common, par value $.01 per share;
100,000,000 authorized; none issued and
outstanding at December 31, 1996 and
1997 and June 30, 1998 41,093,684
outstanding on a pro forma basis at June
30, 1998................................ -- -- -- 411
Series A common, par value $.01 per
share; 100,000,000 authorized;
20,300,000 issued and outstanding shares
at December 31, 1997 and 20,312,040
issued and outstanding shares at June
30, 1998, and none at December 31, 1996;
none issued and outstanding on a pro
forma basis at June 30, 1998............ -- 203 203 --
Series B common, par value $.01 per
share; convertible and exchangeable;
260,000 authorized; 221,052 issued and
outstanding shares at December 31, 1997
and June 30, 1998, and none at December
31, 1996 and on a pro forma basis at
June 30, 1998........................... -- 2 2 --
Series B, non-voting common, par value
$.01 per share; exchangeable; 260,000
authorized; 38,948 issued and
outstanding shares at December 31, 1997
and June 30, 1998, and none at December
31, 1996 and on a pro forma basis at
June 30, 1998........................... -- -- -- --
Special voting, par value $.01 per share;
exchangeable; 15,000,000 authorized;
7,700,000 issued and outstanding shares
at December 31, 1997 and June 30, 1998,
and none at December 31, 1996; 6,549,480
shares issued and outstanding on a pro
forma basis at June 30, 1998 ............. -- 77 77 65
Additional paid-in capital................. -- 15,744 15,770 107,019
Accumulated other comprehensive income
(loss).................................... -- (15) (48) (48)
Accumulated deficit........................ (60) (1,349) (22,737) (22,737)
------ ------- ------- -------
Total shareholders' equity (deficit)..... (60) 14,662 (6,733) 84,710
------ ------- ------- -------
Total liabilities and shareholders'
equity (deficit)........................ $3,687 $24,757 $24,152 $98,582
====== ======= ======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-3
<PAGE>

ENTRUST TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- ----------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License............... $ 1,845 $ 8,689 $ 16,486 $ 5,677 $ 15,845
Services and
maintenance.......... 2,128 4,113 8,520 4,214 5,093
---------- ---------- ---------- ---------- ----------
Total revenues...... 3,973 12,802 25,006 9,891 20,938
---------- ---------- ---------- ---------- ----------
Cost of revenues:
License............... 34 393 502 229 812
Services and
maintenance.......... 950 3,157 4,414 2,111 3,089
---------- ---------- ---------- ---------- ----------
Total cost of
revenues........... 984 3,550 4,916 2,340 3,901
---------- ---------- ---------- ---------- ----------
Gross profit............ 2,989 9,252 20,090 7,551 17,037
---------- ---------- ---------- ---------- ----------
Operating expenses:
Sales and marketing... 1,914 3,858 11,193 3,999 10,982
Research and
development.......... 2,287 2,874 5,692 2,077 5,346
General and
administrative....... 1,212 2,464 3,695 1,479 2,266
Acquired in-process
research and
development.......... -- -- -- -- 20,208
---------- ---------- ---------- ---------- ----------
Total operating
expenses........... 5,413 9,196 20,580 7,555 38,802
---------- ---------- ---------- ---------- ----------
Income (loss) from
operations............. (2,424) 56 (490) (4) (21,765)
Interest income......... -- -- 723 415 217
---------- ---------- ---------- ---------- ----------
Income (loss) before
(provision) benefit for
income taxes........... (2,424) 56 233 411 (21,548)
(Provision) benefit for
income taxes........... 301 331 281 (15) 160
---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ (2,123) $ 387 $ 514 $ 396 $ (21,388)
========== ========== ========== ========== ==========
Net income (loss) per
share
Basic................. -- -- $ 0.02 $ 0.01 $ (0.69)
Diluted............... -- -- $ 0.01 $ 0.01 $ (0.69)
Weighted average common
shares outstanding
Basic................. -- -- 30,700,000 30,700,000 30,848,689
Diluted............... -- -- 41,742,972 41,063,840 46,685,839
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-4
<PAGE>

ENTRUST TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

AND THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SERIES B
SERIES A SERIES B NON-VOTING SPECIAL
COMMON COMMON COMMON VOTING ACCUMULATED
STOCK STOCK STOCK STOCK ADDITIONAL OTHER ACCUMULATED
----------------- -------------- ------------- ---------------- PAID-IN COMPREHENSIVE INCOME
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL INCOME (LOSS) (DEFICIT)
---------- ------ ------- ------ ------ ------ --------- ------ ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31,
1994............ -- $ -- -- $ -- -- $ -- -- $ -- $ -- $ -- $ 2,095
Change in
shareholder's
net
investment..... -- -- -- -- -- -- -- -- -- -- 1,700
Net income...... -- -- -- -- -- -- -- -- -- -- (2,123)
---------- ------ ------- ------ ------ ----- --------- ------ ------- ------ --------
Balances at
December 31,
1995............ -- -- -- -- -- -- -- -- -- -- 1,672
Change in
shareholder's
net
investment..... -- -- -- -- -- -- -- -- -- -- (2,119)
Net income...... -- -- -- -- -- -- -- -- -- -- 387
---------- ------ ------- ------ ------ ----- --------- ------ ------- ------ --------
Balances at
December 31,
1996............ -- -- -- -- -- -- -- -- -- -- (60)
Series A common
shares issued.. 20,300,000 203 -- -- -- -- -- -- (173) -- --
Special Voting
shares issued.. -- -- -- -- -- -- 7,700,000 77 (66) -- --
Series B common
shares issued.. -- -- 221,052 2 -- -- -- -- 15,302 -- --
Series B Non-
Voting common
shares issued.. -- -- -- -- 38,948 -- -- -- 2,696 -- --
Share capital
issuance
costs.......... -- -- -- -- -- -- -- -- (2,015) -- --
Translation
adjustment..... -- -- -- -- -- -- -- -- -- (15) --
Change in
shareholder's
net
investment..... -- -- -- -- -- -- -- -- -- -- (1,803)
Net income...... -- -- -- -- -- -- -- -- -- -- 514
---------- ------ ------- ------ ------ ----- --------- ------ ------- ------ --------
Balances at
December 31,
1997............ 20,300,000 203 221,052 2 38,948 -- 7,700,000 77 15,744 (15) (1,349)
Series A common
shares issued
(unaudited).... 12,040 -- -- -- -- -- -- -- 26 -- --
Translation
adjustment
(unaudited).... -- -- -- -- -- -- -- -- -- (33) --
Net income
(unaudited).... -- -- -- -- -- -- -- -- -- -- (21,388)
---------- ------ ------- ------ ------ ----- --------- ------ ------- ------ --------
Balances at June
30, 1998
(unaudited)..... 20,312,040 $203 221,052 $ 2 38,948 $ -- 7,700,000 $ 77 $15,770 $ (48) $(22,737)
========== ====== ======= ====== ====== ===== ========= ====== ======= ====== ========
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
(DEFICIT)
-------------
<S> <C>
Balances at
December 31,
1994............ $ 2,095
Change in
shareholder's
net
investment..... 1,700
Net income...... (2,123)
-------------
Balances at
December 31,
1995............ 1,672
Change in
shareholder's
net
investment..... (2,119)
Net income...... 387
-------------
Balances at
December 31,
1996............ (60)
Series A common
shares issued.. 30
Special Voting
shares issued.. 11
Series B common
shares issued.. 15,304
Series B Non-
Voting common
shares issued.. 2,696
Share capital
issuance
costs.......... (2,015)
Translation
adjustment..... (15)
Change in
shareholder's
net
investment..... (1,803)
Net income...... 514
-------------
Balances at
December 31,
1997............ 14,662
Series A common
shares issued
(unaudited).... 26
Translation
adjustment
(unaudited).... (33)
Net income
(unaudited).... (21,388)
-------------
Balances at June
30, 1998
(unaudited)..... $ (6,733)
=============
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-5
<PAGE>

ENTRUST TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------- -----------------
1995 1996 1997 1997 1998
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss).............. $(2,123) $ 387 $ 514 $ 396 $(21,388)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization................. 144 204 360 177 400
Adjustment to cumulative
translation account.......... -- -- (15) (2) (33)
Deferred income taxes......... 10 4 (743) (229) (288)
Acquired in-process research
and development.............. -- -- -- -- 20,208
Changes in assets and
liabilities:
(Increase) decrease in
accounts receivable......... 398 (967) (4,665) (2,517) (2,805)
(Increase) decrease in other
receivables................. -- -- (2,089) (1,072) 708
(Increase) decrease in
prepaid expenses............ 35 (40) (400) 55 (126)
Increase (decrease) in
accounts payable............ 230 647 335 350 1,674
Increase in accrued
liabilities................. 29 891 1,121 2,963 270
Increase in deferred income.. 113 1,686 1,186 464 1,451
Increase (decrease) due to
related party............... -- -- 2,257 1,531 (1,561)
------- ------- -------- ------- --------
Net cash provided by (used in)
operating activities......... (1,164) 2,812 (2,139) 2,116 (1,490)
------- ------- -------- ------- --------
Cash flows from investing
activities:
Purchases of property and
equipment..................... (536) (693) (895) (438) (995)
Purchases of short-term
investments................... -- -- (12,308) (2,477) (5,052)
Dispositions of short-term
investments................... -- -- 3,695 -- 11,878
Payment on purchase of r/3/
Security
Engineering AG................ -- -- -- -- (4,391)
------- ------- -------- ------- --------
Net cash provided by (used in)
investing activities......... (536) (693) (9,508) (2,915) 1,440
------- ------- -------- ------- --------
Cash flows from financing
activities:
Proceeds from long-term debt... -- -- 1,449 -- --
Repayment of long-term debt.... -- -- -- -- (1,419)
Transfers from Nortel.......... 6,070 9,716 -- -- --
Transfers to Nortel............ (4,370) (11,835) (1,803) (1,803) --
Proceeds from exercise of stock
options....................... -- -- -- -- 26
Proceeds from issuance of
common and special voting
stock, net of issuance costs
of $2,015..................... -- -- 16,026 16,026 --
------- ------- -------- ------- --------
Net cash provided by (used in)
financing activities......... 1,700 (2,119) 15,672 14,223 (1,393)
------- ------- -------- ------- --------
Net change in cash and cash
equivalents.................... -- -- 4,025 13,424 (1,443)
Cash and cash equivalents at
beginning of period............ -- -- -- -- 4,025
------- ------- -------- ------- --------
Cash and cash equivalents at end
of period...................... $ -- $ -- $ 4,025 $13,424 $ 2,582
======= ======= ======== ======= ========
Non-cash investing activities:
Issuance of redeemable Series A
common stock for property and
equipment, current assets, and
technology, net of current li-
abilities and related party
note.......................... -- -- -- -- 17,013
======= ======= ======== ======= ========
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE DATA)

1. BACKGROUND AND BASIS OF PRESENTATION

BACKGROUND

In January of 1994, Northern Telecom Limited, and its subsidiary Northern
Telecom Inc. (collectively "Nortel"), established the Secure Networks group
(the "Division") to pursue the development and sales of public key
infrastructure ("PKI") products. PKI products combine powerful public key data
encryption technology with transparent, life cycle digital certificate
management to enable users to communicate securely over public and private
networks.

During 1996, Nortel announced its intention to create a separate company,
Entrust Technologies Inc. (the "Company") consisting of the operations of the
Division (the "Separation"). The Company was incorporated in December 1996
with nominal share capital, all of which was contributed by Nortel. At the
close of business on December 31, 1996, Nortel transferred to the Company
certain of the assets and liabilities, intellectual property, rights, licenses
and contracts of the Division of Nortel.

In exchange Nortel received 20,300,000 shares of the Company's Series A
common stock, 7,700,000 shares of the Company's Special Voting stock, and cash
consideration. At the close of business on December 31, 1996, the Company
issued 260,000 shares of its Series B common stock in a private placement for
$100 per share less underwriting costs and commissions of $7.75 per share.
After the completion of the private placement, Nortel owned approximately
73.0% of the outstanding shares of the Company's common stock assuming
conversion of the Series B common stock and Series B Non-Voting common stock
into an aggregate of 13,063,836 shares of Series A common stock.

BASIS OF PRESENTATION

These consolidated financial statements have been prepared for the purpose
of presenting the balance sheets of the Company as at December 31, 1997 and
June 30, 1998 and the related statements of operations, shareholders' equity
and cash flows for the year ended December 31, 1997 and for the six months
ended June 30, 1997 and 1998. The historical comparative year results,
including the balance sheet as at December 31, 1996 and the related statements
of operations, shareholders' equity and cash flows for each of the two years
in the period ended December 31, 1996, represent the operations of the
Division transferred to the Company from Nortel in the Separation (the
"Company Business"). These historical results of the Division present the
financial position of the Division as a separate reporting entity independent
of Nortel and its subsidiaries, as if the Division were a stand-alone entity
for these periods. The 1995 and 1996 consolidated financial statements have
been prepared using the historical basis in the assets and liabilities and
historical results of operations related to the Company Business. Changes in
shareholder's net investment in 1995 and 1996 represent Nortel's contribution
of its net investment after giving effect to the net income (loss) of the
Division and net cash transfers to or from the Division. The shareholder's net
investment was not transferred to the Company as part of the Separation.

The 1995 and 1996 consolidated financial statements, presented here for
comparison purposes, include certain Nortel corporate costs that were
allocated to the Division using procedures deemed appropriate for the nature
of the expenses involved. The procedures utilized various allocation bases
such as invested net assets, number of employees and related payroll costs,
and direct effort expended. Management believes that the allocations reflected
in the 1995 and 1996 consolidated financial statements are reasonable, but
they were not necessarily indicative of the costs that would

F-7
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

have been incurred had the Division functioned as a stand-alone company. No
corporate costs were allocated to the Company, in this way, in the year ended
December 31, 1997 or the six months ended June 30, 1998. After the Separation,
Nortel continued to provide certain "corporate" services to the Company. Fees
charged for such services are based on Nortel's internal usage-based fee
structures where applicable or Nortel's direct cost of services, including
total compensation and out-of-pocket expenses.

INCOME TAX PROVISION

As the Company operated as a division of Nortel in fiscal years 1995 and
1996, it did not file separate income tax returns. Income tax expense has been
estimated based upon an application of Nortel's effective tax rate for those
periods.

CASH BALANCES

Prior to January 1, 1997, the Company, as a division of Nortel, participated
in the Nortel cash management system and, accordingly, did not maintain cash
balances other than minimal amounts.

2. SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The consolidated financial statements of the Company include the accounts of
its majority-owned Canadian subsidiary, Entrust Technologies Limited, its
wholly-owned U.K. subsidiary, Entrust Technologies Limited, its wholly-owned
Swiss subsidiary, r/3/ Security Engineering AG, and its wholly-owned German
subsidiary, Entrust Technologies GmbH. The minority interest in the Canadian
subsidiary has been insignificant to date. All significant intercompany
transactions and accounts are eliminated in consolidation.

TRANSLATION OF FOREIGN CURRENCIES

The accounts of the Company's subsidiaries have been translated into U.S.
dollars. Assets and liabilities have been translated at the exchange rates in
effect at the balance sheet date. Revenues, expenses and cash flow amounts are
translated at average rates for the period. The resultant translation
adjustments are included in comprehensive income as a separate component of
shareholders' equity. Gains and losses from foreign currency transactions are
included in the determination of net income and are not material.

The Company does not use hedging or derivatives and, as a result, may be
exposed to currency translation adjustments in the future. However, the
Company transacts the majority of its international sales in U.S. dollars,
except for Canada where the Company has both significant costs and revenues,
which the Company believes mitigates the potential impact of currency
fluctuations.

UNAUDITED INTERIM FINANCIAL INFORMATION

The consolidated financial statements as of and for the six months ended
June 30, 1997 and 1998 are unaudited but, in the opinion of management,
include all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the results for such periods. The results
of operations for the six months ended June 30, 1998 are not necessarily
indicative of results to be expected for the full fiscal year.

F-8
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

REVENUE RECOGNITION

The Company generates revenues primarily from licensing the rights to its
software products to end-users and from sublicense fees from resellers. The
Company also generates revenues from consulting, training and post-contract
support ("maintenance"). In October 1997, the AICPA issued Statement of
Position ("SOP") No. 97-2, "Software Revenue Recognition", which the Company
adopted, effective January 1, 1998. Such adoption had no effect on the
Company's method of recognizing revenues. Prior to 1998, the Company's revenue
recognition policy was in accordance with the provisions of the preceding
authoritative guidance provided by SOP 91-1 "Software Revenue Recognition".

Revenues from perpetual software license agreements are recognized as
revenue upon receipt of an executed license agreement, or an unconditional
order under an existing license agreement, and shipment of the software, if
there are no significant remaining vendor obligations and collection of the
receivable is probable.

Consulting and training revenues are generally recognized as the services
are performed. Consulting services are typically performed under separate
service agreements and are usually performed on a time and material basis.
Such services primarily consist of implementation services related to the
installation and deployment of the Company's products and do no include
significant customization or development of the underlying software code.

The Company uses the percentage of completion method to account for large
custom development contracts. Under this method, the Company recognizes
revenue and profit as the work on the contract progresses. Revenue is
recognized by applying the percentage of the total estimated contract cost
incurred to date to the total contract value. The total project cost estimates
are reviewed on a regular basis.

COST OF REVENUES

Cost of licenses includes the cost of media, product packaging,
documentation and other production costs and third-party royalties.

Cost of services consists primarily of salaries, benefits and allocated
overhead costs related to consulting, training and customer support personnel,
including the cost of third-party consultants engaged by the Company.

PROPERTY AND EQUIPMENT

Property and equipment is stated at cost. Depreciation is calculated
generally using the straight-line method over the estimated useful lives of
the assets. The expected useful lives of the furniture and fixtures, computer
and telecom equipment and software is three to five years and the remaining
term of the facility lease for leasehold improvements.

When assets are sold or retired, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is
included in operations. Maintenance and repairs are charged to operations as
incurred.

F-9
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Assets are reviewed for impairment on the basis of undiscounted cash flows.
If the cash flows are less than the asset's carrying value, the asset is
written down to its fair value.

OTHER RECEIVABLES

Other receivables include federal income tax and Canadian goods and services
tax refunds of $1,644 and $1,156 at December 31, 1997 and June 30, 1998,
respectively.

RESEARCH AND DEVELOPMENT COSTS

To date the Company has not capitalized any development costs under
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed". The
Company has defined attainment of technological feasibility as completion of a
working model. The period of time beginning with the establishment of a
working model and ending when a product is offered for sale is typically very
short. Accordingly, costs that were eligible for capitalization were
insignificant.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. The Company's cash and cash
equivalents are maintained with a bank and a brokerage institution.

SHORT-TERM INVESTMENTS

At December 31, 1997 and June 30, 1998, the Company's investments consisted
of investments in a strategic cash management account which consists primarily
of securities guaranteed by the U.S. government or its agencies and highly
rated municipal bonds with a remaining maturity of not more than 12 months.

The Company has adopted SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities". This statement requires that securities be
classified as "held to maturity", "available for sale" or "trading", and the
securities in each classification be accounted for at either amortized cost or
fair market value, depending upon their classification. The Company has the
intent and ability to hold all investments until maturity. Therefore, all such
investments are classified as held to maturity investments and carried at
amortized cost in the accompanying consolidated financial statements. At
December 31, 1997 and June 30, 1998, the amortized cost of the Company's
investments approximated fair value.

The Company's investments consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 JUNE 30, 1998
--------------------- ---------------------
MATURITY OF MATURITY OF
AMORTIZED SECURITIES AMORTIZED SECURITIES
COST WITHIN ONE COST WITHIN ONE
BASIS YEAR BASIS YEAR
--------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Foreign debt securities........ $1,011 $1,011 $ -- $ --
Municipal debt securities...... 3,686 3,686 -- --
U.S. government agency debt se-
curities...................... 3,916 3,916 1,787 1,787
------ ------ ------ ------
$8,613 $8,613 $1,787 $1,787
====== ====== ====== ======
</TABLE>

F-10
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

INCOME TAXES

The Company uses the asset and liability method to account for income taxes.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the carrying amounts of
existing assets and liabilities for accounting purposes, and their respective
tax bases. Deferred income tax assets and liabilities are measured using
statutory tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The
effect on deferred income tax assets and liabilities of a change in statutory
tax rates is recognized in net income in the year of change. A valuation
allowance is recorded for those deferred income tax assets whose
recoverability is not sufficiently likely.

INCOME PER SHARE

Basic income per share is calculated by dividing the net income by the
weighted average number of shares of common stock of all classes outstanding
during the year, after reflecting the right of the Series B common
stockholders to additional shares as described in Note 7. Diluted income per
share is calculated by dividing the net income by the weighted average number
of shares of common stock and potential common stock outstanding, and when
dilutive, exchangeable special voting stock on an as-if converted basis,
additional conversion rights of Series B common shares, and options to
purchase common stock using the treasury stock method.

Net income per share has been calculated as follows:

<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ---------------------
1997 1997 1998
------------ ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Net income available to common share-
holders (in thousands)................ $ 514 $ 396 $ (21,388)
========== ========== ==========
Weighted average common shares out-
standing:
Basic:
Series A common stock................. 20,300,000 20,300,000 20,448,689
Series B common stock................. 8,842,080 8,842,080 8,842,080
Series B Non-Voting common stock...... 1,557,920 1,557,920 1,557,920
---------- ---------- ----------
Basic weighted average common shares
outstanding.......................... 30,700,000 30,700,000 30,848,689
========== ========== ==========
Basic net income per share............ $ 0.02 $ 0.01 $ (0.69)
========== ========== ==========
Diluted:
Basic weighted average common shares
outstanding.......................... 30,700,000 30,700,000 30,848,689
Conversion rights on Special Voting
stock................................ 7,700,000 7,700,000 7,700,000
Additional conversion rights of Series
B Voting and Non-Voting common
stock................................ 2,663,836 2,663,836 2,663,836
Net effect of dilutive options using
the treasury stock method............ 679,132 -- 5,473,314
---------- ---------- ----------
Diluted weighted average common shares
outstanding.......................... 41,742,968 41,063,836 46,685,839
========== ========== ==========
Diluted net income per share.......... $ 0.01 $ 0.01 $ (0.69)
========== ========== ==========
</TABLE>

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to market and
credit risk consist principally of cash and cash equivalents, short-term
investments and accounts receivable. The Company has investment policies that
limit the amount of credit exposure to any one issuer and restrict placement
of these investments to issuers evaluated as credit worthy. The Company
maintains its cash and cash equivalents, and short-term investments, with high
quality financial

F-11
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

institutions and investment managers. The Company performs periodic reviews of
the credit standing of its investments and the financial institutions managing
those investments.

The Company's customer base consists primarily of large, well-established
companies or government agencies. Five customers accounted for approximately
88%, 55% and 66% of accounts receivable as of December 31, 1996 and 1997 and
June 30, 1998 respectively. The Company performs ongoing credit evaluations of
its customers, and generally, does not require collateral from its customers
to support accounts receivable. Requests to extend significant credit to
customers are reviewed and approved by senior management. The Company
maintains an allowance for potential losses due to credit risk, but has not
experienced significant write-offs. Management believes that the reserves for
losses are adequate. The following table summarizes the changes in the
allowance for doubtful accounts:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Allowance for doubtful accounts, beginning of
period............................................. $ 73 $ 129 $416
Additional provision................................ 56 287 44
------ ------ ----
Allowance for doubtful accounts, end of period...... $ 129 $ 416 $460
====== ====== ====
</TABLE>

In 1995, two customers accounted for an aggregate of 71% of revenues, one of
which accounted for 53% while the other customer accounted for 18% of revenues
for the year. In 1996, three customers accounted for an aggregate of 64% of
revenues for the year, and individually these customers accounted for 29%, 20%
and 15% of revenues for that year. In 1997, three customers accounted for an
aggregate of 42% of revenues. One of these customers was the same customer who
accounted for 29% of 1996 revenues and this customer accounted for 19% of
revenues for 1997. The other two major customers in 1997 accounted for 12% and
11% of revenues, respectively.

The Company is subject to foreign currency exchange risk in the form of
exposures to changes in currency exchange rates between the United States and
Canada and the United Kingdom. Management periodically reviews the potential
financial impact of this risk and currently believes that the Company is not
subject to significant potential losses as a result.

RECENT PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("FAS 131") and SFAS No. 130, "Reporting Comprehensive Income" ("FAS 130").
FAS 131 redefines how operating segments are determined and requires
disclosure of certain financial and descriptive information regarding those
segments. Management believes that the adoption of SFAS No. 131 will not have
a material impact on the financial statements.

In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income,"
which establishes standards for reporting and displaying comprehensive income,
as defined, and its components in financial statements. The Company's adoption
of SFAS No. 130 had no impact on the consolidated financial statements.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments. The Company currently does not use
hedging or derivatives and, as a result, does not anticipate any impact on the
financial statements.

F-12
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

USE OF ESTIMATES

The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

3. PROPERTY AND EQUIPMENT

Property and equipment, at cost, consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1996 1997 1998
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and telecom equipment................ $1,305 $1,491 $2,363
Furniture and fixtures........................ -- 86 469
Leasehold improvements........................ -- 639 808
Software distribution rights.................. 225 218 213
------ ------ ------
1,530 2,434 3,853
Less: accumulated depreciation and amortiza-
tion......................................... (385) (754) (1,270)
------ ------ ------
Total property and equipment, net............. $1,145 $1,680 $2,583
====== ====== ======
</TABLE>

4. ACCRUED LIABILITIES

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1996 1997 1998
------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Payroll and related benefits...................... $ 915 $ 1,532 $1,744
Other............................................. 30 534 1,509
----- ------- ------
$ 945 $ 2,066 $3,253
===== ======= ======
</TABLE>

5. LONG-TERM DEBT

At December 31, 1997, the Company had an installment note with a financial
institution. This obligation was unsecured with interest at an effective rate
of 6.9% per annum and the maturities under this note are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
For the six months ended June 30, 1998............. $ 3 $ --
For the six months ended December 31, 1998......... -- 5
For the year ended December 31, 1999............... 627 12
For the year ended December 31, 2000............... 819 13
------ ------
1,449 30
Less: current portion.............................. -- (11)
------ ------
$1,449 $ 19
====== ======
</TABLE>

F-13
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. INCOME TAXES

The following table presents the U.S. and foreign components of income
(loss) before income taxes and the provision for income taxes. 1995 and 1996
figures are estimated on a pro forma basis for comparative purposes.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996 1997
------- ---- -----
<S> <C> <C> <C>
Income (loss) before income taxes
United States...................................... $ (799) $ (8) $ 2
Foreign............................................ (1,625) 64 231
------- ---- -----
$(2,424) $ 56 $ 233
======= ==== =====
(Provision) benefit for income taxes
Current:
Federal.......................................... $ -- $-- $(337)
State and local.................................. -- -- (76)
Foreign.......................................... 301 331 (49)
------- ---- -----
301 331 (462)
------- ---- -----
Deferred:
Federal.......................................... -- -- 119
State and local.................................. -- -- 28
Foreign.......................................... -- -- 596
------- ---- -----
-- -- 743
------- ---- -----
Total benefit for income taxes....................... $ 301 $331 $ 281
======= ==== =====

The difference between the actual income tax provision and the tax provision
computed by applying the statutory Federal income tax rate to income (loss)
before income taxes is attributable to the following:

<CAPTION>
DECEMBER 31,
--------------------
1995 1996 1997
------- ---- -----
<S> <C> <C> <C>
Income tax (provision) benefit at 34%................ $ 824 $(19) $ (79)
State and local taxes, net of Federal benefits....... -- -- (48)
Foreign earnings taxed at different rate............. 257 (6) 15
Unrecorded benefit of tax losses..................... (1,081) -- --
Canadian research and development tax credits
utilized............................................ 301 331 393
Utilization of tax losses carry forward.............. -- 25 --
------- ---- -----
Total benefit for income taxes....................... $ 301 $331 $ 281
======= ==== =====
</TABLE>

F-14
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The components of the deferred income tax liability classified by the source
of the cumulative temporary differences that gave rise to the credit are as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Tax depreciation in excess of accounting
depreciation.................................... $ 19 $ 7
Amortization of Sec. 197 assets not deductible
for accounting purposes......................... -- 212
Accounting provisions not deductible for tax
purposes........................................ -- (200)
----- -----
$ 19 $ 19
===== =====

The components of the deferred income tax benefit classified by source of
the cumulative temporary differences that gave rise to the debit are as
follows:

<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Accounting provisions not deductible for tax
purposes........................................ $ -- $ 147
Research and development tax credits............. -- 596
----- -----
$ -- $ 743
===== =====
</TABLE>

As at December 31, 1997, the Company has available for carry-forward to
reduce future Canadian federal income taxes, scientific research and
experimental development investment tax credits of approximately $404. These
tax credits expire in the year 2007.

7. CAPITAL STOCK

On January 24, 1997, the Board of Directors declared a 10-for-1 stock split
effected in the form of a stock dividend, payable to the shareholders of
Series A common stock and Special Voting stock. On June 18, 1998, the Board of
Directors approved an increase in the authorized number of shares of Series A
common stock from 15,000,000 to 100,000,000, Preferred stock from 500,000 to
5,000,000 and Special Voting stock from 2,500,000 to 15,000,000.

The Board of Directors also approved on June 18, 1998 a 4-for-1 stock split,
effected in the form of a stock dividend payable to the shareholders of Series
A common stock and Special Voting stock. In addition, the Board of Directors
approved an amendment to the Company's Articles of Incorporation, which
redesignated the Series A common stock as Common stock effective upon the
completion of a public offering of the Company's Common stock. The
consolidated financial statements have been restated to reflect the increase
in the number of authorized shares and these stock splits.

SERIES A AND SERIES B COMMON STOCK

The holders of Series A and Series B common stock are entitled to one vote
per share and are entitled to dividends when and if declared by the Board of
Directors of the Company. The Series B Non-Voting common stock has the same
rights and privileges as the Series B common stock except for the non-voting
nature of the stock and it is exchangeable at the option of the holder into
Series B common stock. The Company's Series B common stock and Series B Non-
Voting common stock will automatically convert into 13,063,836 shares of
Common stock upon completion of a public offering of the Company's Common
stock.

F-15
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

REDEEMABLE SERIES A COMMON STOCK

The holders of the Redeemable Series A common stock are entitled to the same
rights and privileges as the Series A common stock, except for the special
provisions described in Note 12. At June 30, 1998, there were 1,167, 288 of
these shares issued and outstanding.

SPECIAL VOTING STOCK

The Special Voting stock has a par value of $0.01 per share. The holders of
the Special Voting stock also hold 7,700,000 Exchangeable shares in the
Company's majority owned subsidiary Entrust Technologies Limited. At any time
prior to December 31, 2006, the holders of the Special Voting stock have the
right to exchange their shares of Special Voting stock and their Exchangeable
Shares in Entrust Technologies Limited into 7,700,000 shares of Series A
common stock. The Company generally also has the right to demand such exchange
on or before December 31, 2006.

PREFERRED STOCK

The Company is authorized to issue up to 5,000,000 shares of Preferred stock
in one or more series. Each such series of Preferred stock shall have such
rights, preferences, privileges and restrictions, including voting rights,
dividend rights, conversion rights and liquidation preferences, as shall be
determined by the Board of Directors. As of June 30, 1998, the Company has not
issued any shares of Preferred stock.

8. STOCK OPTIONS

EMPLOYEE STOCK OPTION PLAN

During the year ended December 31, 1997, the Company's shareholders approved
the 1996 Stock Incentive Plan (the "Plan") applicable to the Company's full-
time employees, officers, and consultants and authorized 7,228,920 shares of
Series A common stock for issuance thereunder. In May 1998, the Company's
shareholder's increased the authorized number of Series A common stock
available for issuance under this plan to 7,630,920. On June 18, 1998, the
Company's Board of Directors approved an increase of 2,369,080 in the number
of shares available under the Plan, subject to shareholder approval. The
options under the Plan are granted at the then-current fair market value of
the Series A common stock of the Company and generally may be exercised in
equal proportions during the years following the first and second anniversary
of the date of grant, and expire on the tenth anniversary or upon termination
of employment. With respect to options granted to the key management team, 20%
of the options become exercisable upon grant date, with an additional 20% of
the options exercisable at each successive anniversary of the grant date until
the fourth anniversary of the grant date.

F-16
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

A summary of the activity under the Plan is set forth below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------
SHARES
AVAILABLE NUMBER OF WEIGHTED AVERAGE
FOR GRANT SHARES EXERCISE PRICE
---------- --------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1996....... -- --
Authorized....................... 7,228,920 --
Granted.......................... (6,628,800) 6,628,800 $2.16
Forfeited........................ 140,720 (140,720) 2.13
---------- ---------
Balance at December 31, 1997....... 740,840 6,488,080 2.16
Authorized....................... 2,771,080 --
Granted.......................... (985,516) 985,516 8.19
Forfeited........................ 75,792 (75,792) 2.81
Exercised........................ -- (12,040) 2.13
---------- ---------
Balance at June 30, 1998
(unaudited)....................... 2,602,196 7,385,764 2.96
---------- ---------
Exercisable at December 31, 1997... -- 658,120 2.15
========== =========
Exercisable at June 30, 1998
(unaudited)....................... -- 2,201,220 2.29
========== =========
</TABLE>

The following table summarizes information concerning currently outstanding
options as at June 30, 1998 (unaudited):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AVERAGE AVERAGE NUMBER OF AVERAGE
OPTIONS REMAINING EXERCISE OPTIONS EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
- ------------------------ ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.13 to $2.50.......... 6,411,360 8.7 years $2.17 2,141,220 $ 2.13
$6.25 to $12.08......... 974,404 9.7 years $8.22 60,000 $12.08
--------- ---------
7,385,764 2,201,220
========= =========
</TABLE>

STOCK BASED COMPENSATION

The Company applies APB Opinion No. 25 and related interpretations in
accounting for its employee stock-based compensation plans. Accordingly, no
compensation expense has been recognized for its stock-based compensation
plans because the exercise price of each option equals or exceeds the fair
value of the underlying stock as of the grant date for each stock option. Had
compensation costs for the Company's Employee Stock Option Plan been
determined based on the fair value at the grant date for awards under the
Plan, consistent with the methodology prescribed under SFAS 123, the Company's
net income and income per share would have been decreased to the following pro
forma amounts.

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1996 1997
------- ---- -------
<S> <C> <C> <C>
Net income (loss), as reported....................... $(2,123) $387 $ 514
Estimated stock based compensation costs............. -- -- (1,535)
------- ---- -------
Pro forma net income (loss).......................... $(2,123) $387 $(1,021)
======= ==== =======
Basic and diluted net (loss) per share............... -- -- $ (0.03)
======= ==== =======
</TABLE>

F-17
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The weighted average fair value of all options granted during fiscal 1997
was estimated as of the date of grant using the minimum value model and the
Black-Scholes option pricing model with the following weighted average
assumptions.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Expected option life, in years.......................... -- 6
Risk free interest rate................................. -- 6%
Dividend yield.......................................... -- --
</TABLE>

The weighted average fair value for stock options granted during 1997 was
$0.66 per option.

9. RELATED PARTY TRANSACTIONS

Significant related party transactions with the Company's parent, Nortel,
and affiliated companies, not otherwise disclosed in the financial statements,
include the following (information related to the six month periods ended June
30, 1997 and 1998 is unaudited).

The Company paid $2,872, $3,656 and $273 in the years ended December 31,
1995, 1996, and 1997, respectively, $273 for the six months ended June 30,
1997, and none for the same period in 1998, for research and development
services provided by Bell Northern Research Ltd. ("BNR"), a subsidiary of
Nortel. The research and development services and other costs of revenue were
purchased at cost from BNR. Purchases from BNR are settled through the
intercompany accounting system of Nortel.

Revenues include sales to Nortel for the years ended December 31, 1995, 1996
and 1997 of $323, $300 and $495, respectively and $176 and $172 for the six
months ended June 30, 1997 and 1998, respectively. Also, revenues for the year
ended December 31, 1997 include sales to affiliated companies totaling $332.
Sales to affiliated companies were immaterial in 1995 and 1996. Sales to
affiliated companies were $255 and $1,795 for the six months ended June 30,
1997 and 1998, respectively.

During the year ended December 31, 1997, the Company paid Nortel $299 for
services rendered and $137 and $60 for the six months ending June 30, 1997 and
1998, respectively. These transactions are in the normal course of operations,
and are measured at their exchange amounts, which is the amount of
consideration established and agreed to by the related parties.

Also, during the year ended December 31, 1997, and the six months ended June
30, 1998, the Company reimbursed Nortel for expenses paid by Nortel on behalf
of the Company, net of revenues collected by Nortel on behalf of the Company.
The net expenses reimbursed amounted to $5,610 for fiscal 1997 and $3,155 and
$610 for the six months ended June 30, 1997 and June 30, 1998, respectively.
These amounts have been recorded in these financial statements at the carrying
amount of the transactions involved.

Balances due to/from the related party, arising from the sales of product
and receipt of services referred to above, are payable net 30 days from the
date of the related intercompany invoice.

10. COMMITMENTS

The Company leases administrative and sales offices and certain property and
equipment under noncancellable operating leases expiring through 2003. Total
rent expense under such leases for the

F-18
<PAGE>

ENTRUST TECHNOLOGIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

years ended December 31, 1995, 1996 and 1997 were $35, $100, $956,
respectively, and for the six month periods ended June 30, 1997 and 1998 were
$272 and $1,206, respectively.

At June 30, 1998 (unaudited), the future minimum lease payments under
operating leases were as follows:

<TABLE>
<S> <C>
1998 (six months)................................................ $1,307
1999............................................................. 2,525
2000............................................................. 2,258
2001............................................................. 1,652
2002............................................................. 821
Thereafter....................................................... 158
------
Total future minimum lease payments.............................. $8,721
======
</TABLE>

11. SEGMENTED INFORMATION

BUSINESS SEGMENT

The Company operates in one business segment: the design, production and
sale of software products for encryption and digital signature.

GEOGRAPHIC SEGMENTS

Identifiable net assets are those net assets of the Company (1996--the
Division) that are identified with the operations in the geographic areas.

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
Identifiable net assets
United States................................ $(25) $15,012
Europe....................................... -- 30
Canada....................................... (35) (380)
---- -------
Net assets..................................... $(60) $14,662
==== =======
</TABLE>

Transfers between geographic areas are made at prices based on total cost of
the product to the supplying segment. Customer revenues and income (loss)
before income taxes by destination for the years December 31, 1995, 1996 and
1997 were:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
United States.................... $ 1,292 $ 9,758 $14,978
Europe........................... -- 473 1,359
Canada........................... 2,681 2,571 8,669
------- ------- -------
Total revenues..................... $ 3,973 $12,802 $25,006
======= ======= =======
Income (loss) before income taxes:
United States.................... $ (799) $ (8) $ 2
Europe........................... -- -- 231
Canada........................... (1,625) 64 --
------- ------- -------
Total income (loss) before income
taxes............................. $(2,424) $ 56 $ 233
======= ======= =======
</TABLE>

F-19
<PAGE>

ENTRUST TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT (UNAUDITED)

On June 8, 1998, the Company completed the acquisition of r/3/ Security
Engineering AG ("r/3/"), a company based in Zurich, Switzerland which provides
consulting, applied research and product development services related to
commercial security and encryption solutions. Pursuant to the Share Purchase
Agreements dated May 30, 1998, entered into between the Company and the
shareholders of r/3/, the Company agreed to acquire all the outstanding shares
of r/3/ in exchange for approximately 1,167,288 shares of the Company's Series
A common stock, valued at $14.58 per share and cash consideration of $4,391.
In the event the Company's Series A common stock (or any common stock into
which it would convert) is not listed on a United States Exchange within one
year of the closing of the acquisition, the r/3/ shareholders have the right
to require the Company to repurchase the Series A common shares at $14.58 per
share. Additionally, if the average closing price of the Company's Series A
common stock after the first 10 days of trading following an initial public
offering of the stock (the "Market Price") is less than $12.08, then the
Company will be required to pay the difference between the Market Price and
$12.08 to the r/3/ shareholders in cash or in additional stock.

This acquisition has been accounted for under the purchase method of
accounting. The aggregate purchase price was $23,774, which included
approximately $4,391 in cash, $17,013 representing 1,167,288 shares of
Redeemable Series A common stock, approximately $994 in assumed liabilities
and acquisition expenses, and approximately $1,376 of adjustments to the June
8, 1998 opening balance sheet of r/3/ to record the acquired assets and
liabilities at fair value. In connection with the purchase price allocation,
the Company obtained an independent appraisal of the intangible assets which
indicated approximately $20,200 of the acquired intangible assets consisted of
in-process product development. The development of these projects had not
reached technological feasibility and the technology has no alternative future
use and, accordingly, the $20,200 was included as an expense in the
consolidated statements of operations for the six months ended June 30, 1998.

F-20
<PAGE>

REPORT OF THE STATUTORY AUDITORS

To the general meeting of the shareholders of
r/3/ Security Engineering AG, Aathal-Seegraben

As statutory auditors, we have audited the accounting records and the
financial statements (balance sheet, income statement and notes to the
financial statements) of r/3/ Security Engineering AG, Aathal-Seegraben, for
the years ended December 31, 1997 and 1996.

These financial statements are the responsibility of the board of directors.
Our responsibility is to express an opinion on these financial statements
based on our audit. We confirm that we meet the legal requirements concerning
professional qualification and independence.

Our audit was conducted in accordance with auditing standards recognised by
the profession, which are substantially the same as generally accepted
auditing standards in the United States, which require that an audit be
planned and performed to obtain reasonable assurance about whether the
financial statements are free from material misstatement. We have examined on
a test basis evidence supporting the amounts and disclosures in the financial
statements. We have also assessed the accounting principles used, significant
estimates made and the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.

In our opinion, the accounting records, the financial statements and the
proposed appropriation of available earnings and free reserves comply with
accounting principles generally accepted in Switzerland, the Swiss law and the
company's articles of incorporation.

Generally accepted accounting principles in Switzerland vary in certain
respects from accounting principles generally accepted in the United States.
The application of the latter would have affected the determination of net
income for the years ended December 31, 1997 and 1996, to the extent
summarized in Note 7 to the financial statements.

We recommend that the financial statements submitted to you be approved.

WILLI & PARTNER AG

/s/ Marco Willi
Auditor in charge

/s/ Bruno Wust
Auditor in charge

Wetzikon, June 2, 1998

F-21
<PAGE>

R/3/ SECURITY ENGINEERING AG

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
CHF CHF
<S> <C> <C>
ASSETS
Current assets
Cash...................................... 1,653,352.19 1,220,974.97
Securities (incl. treasury stock)......... 10,000.00 49,528.00
Accounts Receivable....................... 1,088,924.20 683,766.40
./. Value Adjustments (Del credere)....... (87,000.00) (87,000.00)
Other Accounts Receivable
Third Parties............................. 29,816.37 28,600.36
Shareholders.............................. 9,176.60 --
Prepaid Expenses & Others................. 132,825.00 95,045.95
Inventory Work in Progress................ 63,410.00 67,445.00
------------ ------------
Total Current Assets.................... 2,900,504.36 2,058,360.68
------------ ------------
Fixed Assets
Financial Investments
Investment in Subsidiary.................. 200,000.00 --
Tangible Fixed Assets
Office Equipment / Computers /
Communication Equipment.................. 316,524.70 374,259.10
Intangible Assets
Development Costs......................... 530,000.00 --
------------ ------------
Total Fixed Assets...................... 1,046,524.70 374,259.10
------------ ------------
Total Assets............................ 3,947,029.06 2,432,619.78
============ ============
LIABILITIES AND EQUITY
Liabilities
Accounts Payable
Third Parties............................. 126,931.50 122,679.55
Related Companies......................... 19,915.50 --
Banks...................................... -- 9,623.05
Other Accounts Payable (short term)
Third Parties............................. 319,721.27 498,187.34
Shareholders.............................. 68,199.05 183,943.08
Accrued Liabilities & Deferred Income...... 717,117.67 368,199.16
Long Term Liabilities
Third Parties............................. -- 63,484.00
Shareholders.............................. 1,614,662.00 114,662.00
Provisions
Guaranties................................ 55,000.00 55,000.00
Others.................................... 136,000.00 235,275.75
------------ ------------
Total Liabilities....................... 3,057,546.99 1,651,053.93
------------ ------------
Shareholders Equity
Share Capital.............................. 400,000.00 400,000.00
Legal Reserve Fund......................... 20,200.00 13,500.00
Reserves for Treasury Stock................ 10,000.00 --
Free Reserves.............................. 351,000.00 235,000.00
Cumulative Profit
Carry Forward............................. 365.85 946.62
Profit Current Year....................... 107,916.22 132,119.23
------------ ------------
Total Shareholders Equity............... 889,482.07 781,565.85
------------ ------------
Total Liabilities & Equity.............. 3,947,029.06 2,432,619.78
============ ============
</TABLE>

F-22
<PAGE>

R/3/ SECURITY ENGINEERING AG

INCOME STATEMENT

<TABLE>
<CAPTION>
1997 1996
------------ ------------
CHF CHF
<S> <C> <C>
EARNINGS
Earning Sales...................................... 5,530,705.13 5,213,708.55
./. Value Adjustments Accounts Receivable........ -- (10,000.00)
Adjustments Work in Progress..................... 15,965.00 11,475.00
Activated Development Costs...................... 530,000.00 --
------------ ------------
Total Earnings................................. 6,076,670.13 5,215,183.55
------------ ------------
EXPENSES
Materials & Services............................... 504,691.22 272,824.45
Personnel Expenses................................. 4,653,153.25 3,726,586.47
Rentals & Leasing.................................. 159,367.60 130,599.50
Financial Expenses................................. 36,336.55 10,033.35
Maintenance & Repair............................... 178,657.05 99,697.70
Insurance on Assets................................ 30,309.30 17,490.40
Professional Literature............................ 12,645.65 11,583.05
Office & Administration............................ 222,241.33 203,308.53
Advertising & Exhibitions.......................... 66,184.45 238,308.40
Other Expenses..................................... 8,458.40 16,598.76
Depreciation / Value Adjustments................... 188,130.00 283,555.55
------------ ------------
Total Expenses................................. 6,060,174.80 5,010,586.16
------------ ------------
Operating Result before Taxes...................... 16,495.33 204,597.39
------------ ------------
NON-OPERATIONAL & EXTRAORDINARY EARNINGS
Financial Earnings................................. 5,413.88 1,737.50
Profit on Sales of Assets.......................... 150,000.00 --
------------ ------------
155,413.88 1,737.50
NON-OPERATIONAL & EXTRAORDINARY EXPENSES & TAXES
Government Taxes................................... 63,992.99 74,215.66
------------ ------------
Net Profit/Loss--non-operational, extraordinary and
tax positions..................................... 91,420.89 (72,478.16)
------------ ------------
Net Profit Enterprise.............................. 107,916.22 132,119.23
============ ============
</TABLE>

F-23
<PAGE>

R/3/ SECURITY ENGINEERING AG

NOTES TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
CHF CHF
----------------- -----------------
<S> <C> <C>
1.Liabilities "leasing contracts"...... 28,552 49,319
2.Insurance Value
Fixed Assets......................... 730,000 730,000
3.Liabilities "Employee Benefits
Plan"................................. -- 91,755
4.Investments in Subsidiaries:
Swiss Security Service Laboratory,
CH-Solothurn
Book Value: 200,000 --
Share Capital: 400,000 --
Loss Subsidiary 1997: 102,700 --
Participating Share in %: 50% --
5.Own Shares\Treasury Stock
Purchase as per 06/10/1997 Number of
Shares: 10 --
Sold as per: -- Number of Shares: -- --
Inventory as per 12/31/1997: 10 --
</TABLE>

6. OTHER REMARKS

The foregoing balance sheet and income statement meet the legal requirements
of Swiss law as well as the principles of lawful accounting. The depreciations
and value adjustments were made adequately and within Swiss tax provisions.

7. RECONCILIATION TO GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED
STATES

The financial statements have been prepared in accordance with accounting
principles generally accepted in Switzerland ("Swiss GAAP") which, in certain
respects, differ from accounting principles generally accepted in the United
States ("US GAAP"). The following is a reconciliation of net income and
shareholder's equity from Swiss GAAP to US GAAP, followed by a description of
the accounting principle differences:

<TABLE>
<CAPTION>
1997 1996
CHF CHF
-------- -------
<S> <C> <C>
Reconciliation of Net Income
Net income per local financial statements............... 107,916 132,119
Description of items having the effect of increasing
reported income:
Excess provisions not required under US GAAP............ -- 23,000
Deferred income tax provided on a US GAAP basis......... 16,800 --
Income tax provided on a statutory full accruals basis.. 18,485 --
Description of items having the effect of decreasing
reported income:
Equity method of accounting for investment.............. (1,350) --
Deferral of future license fees revenue................. (64,939) (72,000)
Recognition of development costs under US GAAP.......... (530,000) --
Income tax provided on a statutory full accruals basis.. -- (25,744)
Deferred income tax provided on a US GAAP basis......... -- (16,800)
Accrued liabilities..................................... (50,623) --
-------- -------
Net income according to generally accepted accounting
principles in the United States........................ (503,711) 40,575
======== =======
</TABLE>

F-24
<PAGE>

R/3/ SECURITY ENGINEERING AG

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
1997 1996
CHF CHF
-------- -------
<S> <C> <C>
Reconciliation of Shareholders' Equity
Shareholders' equity per local financial statements..... 889,482 781,566
Description of items having the effect of increasing re-
ported shareholders' equity:
Excess provisions not required under US GAAP............ 142,000 142,000
Description of items having the effect of decreasing
reported shareholders' equity:
Equity method of accounting for investment.............. (1,350) --
Deferral of future license fees revenue................. (136,939) (72,000)
Shareholder stock....................................... (10,000) --
Recognition of development costs under US GAAP.......... (530,000) --
Income tax provided on a statutory full accruals basis.. (7,259) (25,744)
Deferred income tax provided on a US GAAP basis......... -- (16,800)
Accrued liabilities..................................... (50,623) --
-------- -------
Shareholders' equity according to generally accepted
accounting principles in the United States............. 295,311 809,022
======== =======
</TABLE>

Excess Provisions

Swiss GAAP provides for the recognition of certain provisions (e.g.,
uncollectable accounts receivable and warranty reserves) based upon income tax
planning schemes. These provisions are provided for under US GAAP based upon
reasonable estimates as determined by management. The adjustments shown as
"excess provisions not required under US GAAP" represent the differences
between the two accounting principles.

Equity Method of Accounting

US GAAP requires that companies record investments in subsidiaries, which it
maintains significant influence over management of the business, using the
equity method of accounting. The adjustment shown as "equity method of
accounting for investment" represents the difference in the accounting for a
subsidiary recorded using the cost method of accounting provided by Swiss GAAP
versus the equity method of accounting required by US GAAP.

Deferral of Future License Fees Revenue

US GAAP requires that revenues, which are not earned, be deferred and
recognized when the earnings process has been completed. The adjustments shown
as "deferral of future license fees revenue" removes from income amounts for
which the earnings process is not complete. The Company will recognize such
future revenues under U.S. GAAP when the related software is delivered.

Development Costs

US GAAP requires that when an asset held for production becomes impaired
that the carrying value of such asset be adjusted to reflect the impairment.
The adjustments shown as "recognition of development costs under US GAAP"
represents charges to income for previously deferred product development costs
of a product that has been discontinued for future production.

F-25
<PAGE>

R/3/ SECURITY ENGINEERING AG

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

Accrued Liabilities

US GAAP requires that expenses be recognized in the period incurred. The
adjustment shown as "accrued liabilities" represents costs incurred during the
current period but not recorded until the subsequent period under Swiss GAAP.

Shareholders' Stock

US GAAP requires that investments in stock of the same company be
reclassified to shareholders' equity to offset the shareholders' capital
stock. The adjustment shown as "shareholder stock" represents the
reclassification of an investment in the shareholder stock by the company.

Swiss GAAP does not require that a statement of cash flow be presented as a
basic financial statement. The following is a statement of cash flows for the
years ended December 31, 1997 and 1996 compiled in accordance with US GAAP.

<TABLE>
<CAPTION>
1997 1996
CHF CHF
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income as reconciled under US GAAP........... (503,711.00) 40,575.00
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 188,130.00 283,556.00
Gain on sale of investment..................... (150,000.00) --
Change in assets and liabilities
(Increase)/decrease in accounts receivable... (354,535.00) 25,711.00
(Increase)/decrease in other debtors......... (10,393.00) 28,839.00
(Increase) in work in progress............... (8,010.00) 42,900.00
Increase in prepaid expenses................. (37,779.00) (79,222.00)
Increase in accounts payable and accrued
expenses.................................... 265,653.00 340,716.00
(Decrease)/increase in interest and income
taxes payable................................. (5,863.00) 59,744.00
(Decrease)/increase in deferred taxes.......... (16,800.00) 16,800.00
(Decrease)/increase in other liabilities....... (236,894.00) 141,379.00
------------ ------------
Total adjustments............................ (366,491.00) 860,423.00
------------ ------------
Net cash (used in) provided by operating
activities.................................. (870,202.00) 900,998.00
Cash flows from investing activities:
Proceeds from sale of investment................. 250,000.00 --
Proceeds from sale of securities................. 49,528.00 --
Purchase of investments.......................... (200,000.00) (664.00)
Purchase of capital assets....................... (233,466.00) (315,420.00)
------------ ------------
Net cash used in investing activities........ (133,938.00) (316,084.00)
Cash flows from financing activities
Increase in shareholder loans.................... 1,500,000.00 --
Repayment of third party loans................... (63,484.00) (31,056.00)
------------ ------------
Net cash provided by (used in) financing
activities.................................. 1,436,516.00 (31,056.00)
Net increase in cash............................... 432,376.00 553,858.00
Cash at beginning of year.......................... 1,220,975.00 667,117.00
------------ ------------
Cash at end of year................................ 1,653,351.00 1,220,975.00
============ ============
</TABLE>

F-26
<PAGE>

R/3/ SECURITY ENGINEERING AG

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

The amounts paid in interest and income taxes for the years ended December
31, 1997 and 1996 approximate such amounts reported as expensed in the Income
Statement for such periods.

PROPOSED APPROPRIATION OF AVAILABLE EARNINGS AND FREE RESERVES

<TABLE>
<CAPTION>
CHF
----------
<S> <C>
Carry forward..................................................... 365.85
Profit current year............................................... 107,916.22
----------
Cumulative profit December 31, 1997 .............................. 108,282.07
</TABLE>

The board of directors proposes the appropriation of the cumulative profit
as follows:

<TABLE>
<CAPTION>
CHF
----------
<S> <C>
Distribution of profit in form of shares of the Securights AG
(subsidiary, in the process of being founded) during 1998....... 102,500.00
Allocation to the legal reserve fund, according to the
requirements of Swiss law (article 671 I 1 OR).................. 5,400.00
Carry forward.................................................... 382.07
----------
108,282.07
</TABLE>

Proposition of the board of directors to allocate funds of the free reserves
to the legal reserve fund in order to comply with article 671 II 3 OR (payment
of bonus/dividend of CHF 102,500.--out of the current year profit)

<TABLE>
<CAPTION>
CHF
----------
<S> <C>
Free reserves before allocation.................................. 351,000.00
./. allocation to the legal reserve fund......................... (8,250.00)
----------
Free reserves before allocation.................................. 342,750.00
</TABLE>

Further a proposition of the board of directors to distribute a dividend of
CHF 227,500.--during 1998 from the free reserves, in addition the proposition
of the board of directors to allocate funds of the free reserves to the legal
reserve fund in order to comply with article 671 II 3 OR (payment of
bonus/dividend of CHF 227,500.--from the free reserves)

<TABLE>
<CAPTION>
CHF
-----------
<S> <C>
Free reserves before allocation............................... 342,750.00
Distribution of a bonus/dividend during 1998 from the free
reserves..................................................... (227,500.00)
Allocation to the legal reserve fund, according to the
requirements of Swiss law (article 671 II 3 OR).............. (22,750.00)
-----------
Free reserves after distribution of the bonus/dividend and
allocation to the legal reserve fund......................... 92,500.00
</TABLE>

Proposition of the board of directors to distribute the above mentioned
dividend in form of shares of the Securights AG (subsidiary, in the process of
being founded)

F-27
<PAGE>

ENTRUST TECHNOLOGIES INC

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

On June 8, 1998 the Company completed the acquisition of r/3/ Security
Engineering AG ("r/3/"), a company based in Zurich, Switzerland which provides
consulting, applied research and product development services related to
commercial security and encryption solutions.

The accompanying unaudited condensed consolidated statements of operations
for the six months ended June 30, 1998 and the year ended December 31, 1997
assume the acquisition took place as of the beginning of the periods
presented, and combine the Company's and r/3/'s statements of operations.

Adjustments have been made to r/3/'s statements to conform to the Company's
presentation. The statements of operations for r/3/ were translated at the
average exchange rates for the year ended December 31, 1997 and for the six
months ended June 30, 1998. Adjustments were also made to conform to U.S.
generally accepted accounting principles.

The acquisition has been accounted for as a purchase. The purchase price
allocation reflected in the accompanying pro forma condensed consolidated
financial statements has been prepared on a preliminary basis. The purchase
price allocation will be adjusted based on final valuations of assets
acquired. The purchase price allocation includes a write-off of approximately
$20,208,000 for acquired in-process research and development costs. (See notes
to Pro Forma Condensed Consolidated Financial Statements.)

The method of combining historical financial statements for preparation of
the pro forma condensed consolidated financial statements is for presentation
only. Actual statements of operations of the companies will be combined
commencing on the effective date. The unaudited pro forma information does not
purport to represent what the Company's operations or financial position
actually would have been had the acquisition occurred on the dates specified,
or to project the Company's results of operation or financial position for any
future period or date.

The accompanying pro forma condensed consolidated financial statements
should be read in conjunction with the historical financial statements and
related notes thereto for both the Company and r/3/.

F-28
<PAGE>

ENTRUST TECHNOLOGIES INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------- ------------------------
R/3/ ENTRUST ADJUSTMENTS ENTRUST
----- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
License...................... $ 83 $ 15,845 -- $ 15,928
Services and maintenance..... 1,518 5,093 -- 6,611
----- ---------- ------- ----------
Total revenues............. 1,601 20,938 -- 22,539
----- ---------- ------- ----------
Cost of revenues:
License...................... 3 812 -- 815
Services and maintenance..... 883 3,089 -- 3,972
----- ---------- ------- ----------
Total cost of revenues..... 886 3,901 -- 4,787
----- ---------- ------- ----------
Gross profit................... 715 17,037 -- 17,752
----- ---------- ------- ----------
Operating expenses:
Sales and marketing.......... 415 10,982 -- 11,397
Research and development..... 501 5,346 -- 5,847
General and administrative... 674 2,266 356 (a) 3,296
Acquired in-process research
and development............. -- 20,208 (20,208)(b) --
----- ---------- ------- ----------
Total operating expenses... 1,590 38,802 (19,852) 20,540
----- ---------- ------- ----------
Loss from operations........... (875) (21,765) 19,852 (2,788)
Interest income................ 1 217 (73)(c) 145
----- ---------- ------- ----------
Loss before benefit for income
taxes......................... (874) (21,548) 19,779 (2,643)
Benefit for income taxes....... -- 160 -- 160
----- ---------- ------- ----------
Net income (loss).............. $(874) $ (21,388) $19,779 $ (2,483)
===== ========== ======= ==========
Net income (loss) per share
Basic........................ $ (0.69) $ (0.08)(d)
Diluted...................... $ (0.69) $ (0.08)(d)
Weighted average common shares
outstanding
Basic........................ 30,848,689 31,873,308 (e)
Diluted...................... 46,685,839 47,710,458 (e)
</TABLE>

F-29
<PAGE>

ENTRUST TECHNOLOGIES INC.

UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------ -----------------------
R/3/ ENTRUST ADJUSTMENTS ENTRUST
------ ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
License..................... $ 688 $ 16,486 -- $ 17,174
Services and maintenance.... 2,941 8,520 -- 11,461
------ ---------- ----- ----------
Total revenues............ 3,629 25,006 -- 28,635
------ ---------- ----- ----------
Cost of revenues:
License..................... 10 502 -- 512
Services and maintenance.... 1,581 4,414 -- 5,995
------ ---------- ----- ----------
Total cost of revenues.... 1,591 4,916 -- 6,507
------ ---------- ----- ----------
Gross profit.................. 2,038 20,090 -- 22,128
------ ---------- ----- ----------
Operating expenses:
Sales and marketing......... 582 11,193 -- 11,775
Research and development.... 866 5,692 -- 6,558
General and administrative.. 1,024 3,695 710 (a) 5,429
------ ---------- ----- ----------
Total operating expenses.. 2,472 20,580 710 23,762
------ ---------- ----- ----------
Loss from operations.......... (434) (490) (710) (1,634)
Interest income (expense)..... 2 723 (176)(c) 549
Gain on sale of assets........ 99 -- -- 99
------ ---------- ----- ----------
Income (loss) before benefit
for income taxes............. (333) 233 (886) (986)
Benefit for income taxes...... -- 281 -- 281
------ ---------- ----- ----------
Net income (loss)............. $ (333) $ 514 $(886) $ (705)
====== ========== ===== ==========
Net income (loss) per share
Basic....................... $ 0.02 $ (0.02)(d)
Diluted..................... $ 0.01 $ (0.02)(d)
Weighted average common shares
outstanding
Basic....................... 30,700,000 31,867,288 (e)
Diluted..................... 41,742,972 42,910,260 (e)
</TABLE>

F-30
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom
Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation,
NationsBanc Montgomery Securities LLC and Warburg Dillon Read LLC, a
subsidiary of UBS AG,are acting as representatives, has severally agreed to
purchase from the Company and the Selling Stockholders, the respective number
of shares of Common Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
----------- ---------
<S> <C>
Goldman, Sachs & Co................................................
Donaldson, Lufkin & Jenrette Securities Corporation................
NationsBanc Montgomery Securities LLC..............................
Warburg Dillon Read LLC, a subsidiary of UBS AG....................
---------
Total............................................................ 5,653,334
=========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.

The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the shares of Common Stock are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the representatives.

The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters
of the international offering (the "International Underwriters") providing for
the concurrent offer and sale of 1,413,333 shares of Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two
offerings are identical. The closing of the offering made hereby is a
condition to the closing of the international offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International, Donaldson, Lufkin & Jenrette International, NationsBanc
Montgomery Securities LLC and Warburg Dillon Read, a division of UBS AG.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby and subject to certain exceptions,
it will offer, sell or deliver the shares of Common Stock, directly or
indirectly, only in the United States of America (including the States and the
District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph: (a) any individual who is a
resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase
is located in the United States. Each of the International Underwriters has
agreed pursuant to the Agreement Between that, as part of the distribution of
the shares offered as a part of the international offering, and subject to
certain exceptions, it will (i) not, directly or indirectly, offer, sell or
deliver shares of Common Stock (a) in the United States or to any U.S. persons
or (b) to any person

U-1
<PAGE>

whom it believes intends to reoffer, resell or deliver the shares in the
United States or to any U.S. persons, and (ii) cause any dealer to who it may
sell such shares at any concession to agree to observe a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall
be the initial public offering price, less an amount not greater than the
selling concession.

The Selling Stockholders have granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 848,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the U.S. Underwriters exercise their over-allotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 5,653,334 shares of Common Stock offered. The Selling
Stockholders have granted the International Underwriters a similar option to
purchase up to an aggregate of 212,000 additional shares of Common Stock.

The Company, its directors, officers, stockholders, including the Selling
Stockholders, and optionholders have agreed that, during the period beginning
from the date of this Prospectus and continuing to and including the date 180
days after the date of this Prospectus, they will not offer, sell, contract to
sell or otherwise dispose of any securities of the Company (other than
pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of the Common
Stock or which are convertible into or exchangeable for securities which are
substantially similar to the shares of the Common Stock without the prior
written consent of the representatives, except for the shares of Common Stock
offered in connection with the Offerings. In addition, the Company may issue
shares of Common Stock in connection with any acquisition of another company
if the terms of such issuance provide that such Common Stock shall not be
resold prior to the expiration of the 180-day period referenced in the
preceding sentence.

At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price and subject to local laws for any
international sales, up to approximately 353,333 shares of Common Stock for
certain funds affiliated with the Company's Japanese distributor (the
"Distributor Funds"). The Distributor Funds have expressed an interest in
purchasing such shares in the Offerings and their willingness to enter into
lock-up agreements with the Representatives of the Underwriters under which
they will agree not to sell shares for 180 days after the date of the
Prospectus. In addition, at the request of the Company, the Underwriters have
reserved for sale, at the initial public offering price, 346,267 shares of
Common Stock for certain employees and associates of the Company. There can be
no assurance that any of the reserved shares will be purchased. The number of
shares available for sale to the general public in the Offerings will be
reduced by the number of reserved shares sold. Any reserved shares not so
purchased will be offered to the general public on the same basis as the other
shares offered hereby.

The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed five percent of the total number of shares
of Common Stock offered by them.

U-2
<PAGE>

greater number of shares of Common Stock than they are required to purchase
from the Company in the Offerings. The Underwriters also may impose a penalty
bid, whereby selling concessions allowed to syndicate members or other broker-
dealers in respect of the securities sold in the Offerings for their account
may be reclaimed by the syndicate if such shares of Common Stock are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock, which may be higher than the price that might otherwise prevail
in the open market; and these activities, if commenced, may be discontinued at
any time. These transactions may be effected on the Nasdaq National Market, in
the over-the-counter market or otherwise.

An affiliate of Donaldson, Lufkin & Jenrette Securities Corporation, a
representative of the Underwriters, is the beneficial owner of approximately
500,000 shares of the Company's Common Stock. J.P. Morgan Securities, Inc.,
which is expected to be an Underwriter in the Offerings, is an affiliate of a
customer of the Company and an affiliate of the Morgan Guaranty Trust Company
of New York, which serves as the trustee, and/or investment manager and/or
agent for certain beneficial owners of the Company's Common Stock. Scotia
McLeod Inc., expected to be an Underwriter in the Offerings, is an affiliate
of a customer of the Company.

Prior to the Offerings, there has been no public market for the Shares. The
initial public offering price will be negotiated among the Company and the
representatives of the U.S. Underwriters and the International Underwriters.
Among the factors to be considered in determining the initial public offering
price of the Common Stock, in addition to prevailing market conditions, will
be the Company's historical performance, estimates of the business potential
and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.

The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "ENTU".

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.

U-3
<PAGE>

[Inside back cover]

Centered at the top of the page is the caption "Enterprise Security with
Real-World PKI Solutions." Filling the bottom two-thirds of the page is a
photo montage containing various computer-related images and a globe. The
Company's logo is in the lower right-hand corner of the page.
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE-
SENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR-
MATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Business................................................................. 32
Management............................................................... 48
Certain Transactions..................................................... 56
Principal and Selling Stockholders....................................... 58
Description of Capital Stock............................................. 61
Shares Eligible for Future Sale.......................................... 65
Certain U.S. Tax Considerations Applicable to Non-U.S. Holders of the
Common Stock............................................................ 67
Legal Matters............................................................ 70
Experts.................................................................. 70
Additional Information................................................... 70
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>

----------------

THROUGH AND INCLUDING , 1998 (THE 25TH DAY AFTER THE DATE OF THIS PRO-
SPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPEC-
TUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

7,066,667 SHARES

ENTRUST TECHNOLOGIES INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

----------------

LOGO

----------------

GOLDMAN, SACHS & CO.

DONALDSON, LUFKIN & JENRETTE

NATIONSBANC MONTGOMERY SECURITIES LLC

WARBURG DILLON READ LLC

REPRESENTATIVES OF THE UNDERWRITERS

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

SUBJECT TO COMPLETION, DATED JULY 24, 1998

7,066,667 SHARES

LOGO
COMMON STOCK
(PAR VALUE $.01 PER SHARE)

----------------

Of the 7,066,667 shares of Common Stock offered, 1,413,333 shares are being
offered hereby in an international offering outside the United States and
5,653,334 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per
share will be identical for both offerings. See "Underwriting".

Prior to this offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering
price per share will be between $14.00 and $16.00. For factors to be
considered in determining the initial public offering price, see
"Underwriting".

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

Application has been made to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "ENTU".

----------------

<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
Total(3)................... $ $ $ $
</TABLE>
- --------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

(2) Before deducting estimated expenses of $900,000 payable by the Company.

(3) The Selling Stockholders have granted the International Underwriters an
option for 30 days to purchase up to an additional 212,000 shares at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Selling Stockholders
have granted the U.S. Underwriters a similar option with respect to an
additional 848,000 shares as part of the concurrent U.S. offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to Selling Stockholders will be $ ,
$ and $ , respectively. See "Underwriting".

----------------

The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that certificates for the shares will be ready for delivery in New
York, New York on or about , 1998, against payment therefor in
immediately available funds.

GOLDMAN SACHS INTERNATIONAL
DONALDSON, LUFKIN & JENRETTE

NATIONSBANC MONTGOMERY SECURITIES LLC

WARBURG DILLON READ

----------------

The date of this Prospectus is , 1998.
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
International Underwriters named below, and each of such International
Underwriters for whom Goldman Sachs International, Donaldson, Lufkin &
Jenrette International, NationsBanc Montgomery Securities LLC and Warburg
Dillon Read, a division of UBS AG, are acting as representatives, has
severally agreed to purchase from the Company and the Selling Stockholders,
the respective number of shares of Common Stock set forth opposite its name
below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
----------- ---------
<S> <C>
Goldman Sachs International........................................
Donaldson, Lufkin & Jenrette International.........................
NationsBanc Montgomery Securities LLC..............................
Warburg Dillon Read, a division of UBS AG..........................
---------
Total............................................................ 1,413,333
=========
</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.

The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth
on the cover page of this Prospectus and in part to certain securities dealers
at such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain brokers and dealers. After the shares of
Common Stock are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives.

The Company and the Selling Stockholders have entered into an underwriting
agreement (the "U.S. Underwriting Agreement") with the underwriters of the
U.S. offering (the "U.S. Underwriters") providing for the concurrent offer and
sale of 5,653,334 shares of Common Stock in an offering in the United States.
The offering price and aggregate underwriting discounts and commissions per
share for the two offerings are identical. The closing of the offering made
hereby is a condition to the closing of the U.S. offering, and vice versa. The
representatives of the U.S. Underwriters are Goldman, Sachs & Co., Donaldson,
Lufkin & Jenrette Securities Corporation, NationsBanc Montgomery Securities
LLC and Warburg Dillon Read LLC, a subsidiary of UBS AG.

Pursuant to an Agreement between the International and U.S. Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of
the U.S. Underwriters has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States
or (b) any corporation, partnership or other entity organized in or under the
laws of the United States or any political subdivision thereof and whose
office most directly involved with the purchase is located in the United
States. Each of the International Underwriters has agreed pursuant to the
Agreement Between that, as part of the distribution of the shares offered as a
part of the international offering, and subject to certain exceptions, it will
(i) not, directly or indirectly, offer, sell or deliver shares of Common Stock
(a) in the United States or to any U.S. persons or (b) to any person who it
believes intends to reoffer, sell or deliver the shares in the United States
or to any U.S. persons, and (ii) cause any dealer to whom it may sell such
shares at any concession to agree to observe a similar restriction.

U-1
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

The Selling Stockholders have granted the International Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 212,000 additional shares of Common Stock solely to
cover over-allotments, if any. If the International Underwriters exercise
their over-allotment option, the International Underwriters have severally
agreed, subject to certain conditions, to purchase approximately the same
percentage thereof that the number of shares to be purchased by each of them,
as shown in the foregoing table, bears to the 1,413,333 shares of Common Stock
offered hereby. The Selling Stockholders have granted the U.S. Underwriters a
similar option to purchase up to an aggregate of 848,000 additional shares of
Common Stock.

The Company, its directors, officers, stockholders, including the Selling
Stockholders, and optionholders have agreed that, during the period beginning
from the date of this Prospectus and continuing to and including the date 180
days after the date of this Prospectus, they will not offer, sell, contract to
sell or otherwise dispose of any securities of the Company (other than
pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of the Common
Stock or which are convertible into or exchangeable for securities which are
substantially similar to the shares of Common Stock, without the prior written
consent of the representatives, except for the shares of Common Stock offered
in connection with the Offerings. In addition, the Company may issue shares of
Common Stock in connection with any acquisition of another company if the
terms of such issuance provide that such Common Stock shall not be resold
prior to the expiration of the 180-day period referenced in the preceding
sentence.

At the request of the Company, the Underwriters have reserved for sale, at
the initial public offering price and subject to local laws for any
international sales, up to approximately 353,333 shares of Common Stock for
certain funds affiliated with the Company's Japanese distributor (the
"Distributor Funds"). The Distributor Funds have expressed an interest in
purchasing such shares in the Offerings, and their willingness to enter into
lock-up agreements with the Representatives of the Underwriters under which
they will agree not to sell shares for 180 days after the date of the
Prospectus. In addition, at the request of the Company, the Underwriters have
reserved for sale, at the initial public offering price, 346,267 shares of
Common Stock for certain employees and associates of the Company. There can be
no assurance that any of the reserved shares will be so purchased. The number
of shares available for sale to the general public in the Offerings will be
reduced by the number of reserved shares sold. Any reserved shares not so
purchased will be offered to the general public on the same basis as the other
shares offered hereby.

Each International Underwriter has also agreed that (a) it has not offered
or sold and prior to the date six months after the date of issue of the shares
of Common Stock will not offer or sell any shares of Common Stock to persons
in the United Kingdom except to persons whose ordinary activities involve them
in acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public in the
United Kingdom within the meaning of the Public Offers of Securities
Regulations 1995, (b) it has complied, and will comply, with all applicable
provisions of the Financial Services Act of 1986 of Great Britain with respect
to anything done by it in relation to the

U-2
<PAGE>

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]

shares of Common Stock in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the shares of Common Stock to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 of Great Britain or is a person to whom the document
may otherwise lawfully be issued or passed on.

Buyers of shares of Common Stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the initial public offering price.

In connection with the Offerings, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
in connection with the Offerings. Stabilizing transactions consist of certain
bids or purchases for the purpose of preventing or retarding a decline in the
market price of the Common Stock; and syndicate short positions involve the
sale by the Underwriters of a greater number of shares of Common Stock than
they are required to purchase from the Company in the Offerings. The
Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the
securities sold in the Offerings for their account may be reclaimed by the
syndicate if such shares of Common Stock are repurchased by the syndicate in
stabilizing or covering transactions. These activities may stabilize, maintain
or otherwise affect the market price of the Common Stock, which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected on the Nasdaq National Market, in the over-the-counter market
or otherwise.

An affiliate of Donaldson, Lufkin & Jenrette International, a representative
of the Underwriters, is the beneficial owner of approximately 500,000 shares
of the Company's Common Stock. J.P. Morgan Securities, Inc., which is expected
to be an Underwriter in the Offerings, is an affiliate of a customer of the
Company and an affiliate of the Morgan Guaranty Trust Company of New York,
which serves as the trustee, and/or investment manager and/or agent for
certain beneficial owners of the Company's Common Stock. Scotia McLeod Inc.,
expected to be an Underwriter in the Offerings, is an affiliate of a customer
of the Company.

Prior to the Offerings, there has been no public market for the shares. The
initial public offering price will be negotiated among the Company and the
representatives of the U.S. Underwriters and the International Underwriters.
Among the factors to be considered in determining the initial public offering
price of the Common Stock, in addition to prevailing market conditions, will
be the Company's historical performance, estimates of the business potential
and earnings prospects of the Company, an assessment of the Company's
management and the consideration of the above factors in relation to market
valuation of companies in related businesses.

The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "ENTU".

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.

U-3
<PAGE>

[Inside back cover]

[ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

---------------

TABLE OF CONTENTS

---------------

7,066,667 SHARES

ENTRUST TECHNOLOGIES INC.

COMMON STOCK

(PAR VALUE $.01 PER SHARE)

---------------

LOGO

---------------

GOLDMAN SACHS INTERNATIONAL

DONALDSON, LUFKIN & JENRETTE

NATIONSBANC MONTGOMERY SECURITIES LLC

WARBURG DILLON READ

REPRESENTATIVES OF THE UNDERWRITERS

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.

<TABLE>
<S> <C>
SEC registration fee............................................... $ 38,358
NASD filing fee.................................................... 13,503
Nasdaq National Market listing fee................................. 95,000
Blue Sky fees and expenses......................................... 15,000
Transfer Agent and Registrar fees.................................. 10,000
Accounting fees and expenses....................................... 150,000
Legal fees and expenses............................................ 400,000
Printing and mailing expenses...................................... 100,000
Miscellaneous...................................................... 78,139
--------
Total.......................................................... $900,000
========
</TABLE>
- --------
* To be filed by amendment

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 2-418 of the General Corporation Law of Maryland (the "Maryland
Law") provides that, unless a corporation's charter includes a provision which
restricts or limits the corporation's right to indemnify its officers and
directors, the corporation may indemnify a director or officer with respect to
proceedings instituted against such officer or director by reason of his or
her service in that capacity, unless the act or omission in question was
material and was committed in bad faith or was the result of active and
deliberate dishonesty, unless the director or officer received an improper
personal benefit or unless the director or officer had reasonable cause to
believe that the act or omission was unlawful. The Registrant's Articles of
Incorporation and Bylaws provide that the Registrant shall indemnify and
advance expenses to its currently acting and its former directors to the
fullest extent permitted by the Maryland Law and that the Registrant shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. However,
nothing in the Articles of Incorporation or Bylaws of the Registrant protects
or indemnifies a director, officer, employee or agent against any liability to
which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. To the extent that a director has been successful in
defense of a proceeding, unless limited by charter, the Maryland Law provides
that he shall be indemnified against reasonable expenses incurred in
connection therewith.

The U.S. Underwriting Agreement and the International Underwriting
Agreement, forms of which are filed at Exhibits 1.1 and 1.2 to this
Registration Statement on Form S-1 (the "Underwriting Agreements"), provide
that the Underwriters are obligated under certain circumstances to indemnify
directors, officers and controlling persons of the Registrant against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). Reference is made to the form of Underwriting
Agreements.

Three of the directors of the Registrant are also officers of Northern
Telecom Limited ("NTL"), a shareholder of the Registrant, and are serving on
the Registrant's Board of Directors at the request

II-1
<PAGE>

of NTL. Pursuant to NTL's Bylaws, NTL will indemnify its officers when they
are acting at NTL's request as directors of a corporation of which NTL is a
shareholder, provided that such officers acted honestly, in good faith and had
reasonable grounds to believe their conduct was lawful.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Set forth below is information regarding shares of capital stock issued and
options granted by the Registrant since December 30, 1996, the date of its
incorporation (after giving effect to the Company's ten-for-one and four-for-
one stock splits effective as of February 1997 and July 1998, respectively):

(a) Issuances of Capital Stock

In January 1997, in connection with the incorporation of the Registrant, the
Registrant (i) sold 257,500 shares of Series B Common Stock to a group of
private investors for an aggregate sale price of $25,750,000, (ii) issued
20,300,000 shares of Common Stock to Northern Telecom Inc. in exchange for the
issuance of a promissory note in the principal amount of $8,000,000 and the
transfer of certain contracts and intellectual property rights and (iii)
issued 7,700,000 shares of Special Voting Stock to Northern Telecom Limited in
exchange for $891,542 of property and the transfer of certain contracts and
intellectual property rights.

In January 1997, the Registrant sold 2,500 shares of Series B Non-Voting
Common Stock to a private investor for an aggregate sale price of $250,000 and
issued an additional 36,448 shares of Series B Non-Voting Common Stock to such
investor in exchange for an equivalent number of shares of Series B Common
Stock.

In June 1998, the Registrant issued an aggregate of 1,167,288 shares of
Common Stock to the former stockholders of r/3/ Security Engineering AG, a
Swiss company ("r/3/"), as partial consideration in connection with the
acquisition of r/3/.

(b) Grants of Stock Options

The Registrant's Amended and Restated 1996 Stock Incentive Plan (the
"Incentive Plan") was adopted by the Board of Directors and approved by the
stockholders of the Company in December 1996 and amended and restated by the
Board of Directors in June 1988, and such amendment and restatement was
approved by the stockholders in July 1998. The Incentive Plan was further
amended by the Board of Directors in July 1998. As of June 30, 1998, options
to purchase 7,397,804 shares of Common Stock had been granted under such plan,
at exercise prices ranging from $2.13 to $12.08 per share. The Registrant's
1998 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by the
Board of Directors in July 1998. The Purchase Plan will not become effective
until the closing of the Offering.

The Registrant has reserved (i) an aggregate of 9,600,000 shares of Common
Stock for issuance under the Incentive Plan and (ii) an aggregate of 400,000
shares of Common Stock for issuance under the Purchase Plan.

The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from Securities Act registration set
forth in Sections 3(b) and 4(2) of the Securities Act, or any regulations
promulgated thereunder, relating to sales by an issuer not involving any
public offering, (ii) offered and sold in reliance upon an exemption from
Securities Act registration set forth in Regulation S relating to sales to
non-U.S. persons or (iii) in the case of certain options to purchase shares of
Common Stock and shares of Common Stock issued upon the exercise of such
options, such offers and sales were made in reliance upon an exemption from
registration under Rule 701 of the Securities Act. No underwriters were
involved in the foregoing sales of securities.

II-2
<PAGE>

JITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
2.1* Asset Transfer Agreement, dated as of December 31, 1996, between the
Registrant and Northern Telecom Inc.
2.2* Asset Transfer Agreement, dated as of December 31, 1996, between
Entrust Technologies Limited and Northern Telecom Limited.
2.3+ Share Purchase Agreement, dated as of May 30, 1998, as amended,
between the Registrant and Rainer A. Rueppel.
2.4* Share Purchase Agreement, dated as of May 30, 1998, as amended,
between the Registrant and Invision AG.
2.5+ Form of Share Purchase Agreement between the Registrant and the
minority stockholders of r/3/ Security Engineering AG.
3.1* Articles of Incorporation of the Registrant, as amended.
3.2* Amended and Restated Articles of Incorporation of the Registrant (to
be effective upon the closing of the offering).
3.3* Bylaws of the Registrant.
3.4* Amended and Restated Bylaws of the Registrant (to be effective upon
the closing of the offering).
4.1 Specimen certificate for shares of Common Stock.
5 Opinion of Hale and Dorr LLP.
10.1* Series B Common Stock Purchase Agreement, dated as of December 31,
1996, by and among the Registrant, Northern Telecom Limited and
certain stockholders.
10.2* Series B Non-Voting Common Stock Purchase Agreement, dated as of
January 31, 1997, by and among the Registrant and Societe Generale
Investment Corporation.
10.3** Amended and Restated Registration Rights Agreement, dated as of July
, 1998, by and among the Registrant and certain stockholders.
10.4* Stockholders' Agreement, dated as of December 31, 1996, by and among
the Registrant, Northern Telecom Inc., Northern Telecom Limited and
certain stockholders, as amended by the Stockholder Agreement and
Waiver, dated as of January 31, 1997, by and among the Registrant and
certain stockholders.
10.5 Strategic Alliance Agreement, dated as of December 31, 1996, between
the Registrant and Northern Telecom Limited.
10.6* Services Agreement, dated as of December 31, 1996, between the
Registrant and Northern Telecom Limited.
10.7* Support Agreement, dated as of December 31, 1996, between the
Registrant and Entrust Technologies Limited.
10.8* Share Exchange Agreement, dated as of December 31, 1996, among the
Registrant, Entrust Technologies Limited and Northern Telecom Limited.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.9 Letter Agreement, dated as of April 21, 1997, between the Registrant
and John A. Ryan.
10.10* Letter Agreement, dated as of November 18, 1996, between Northern
Telecom Limited, on behalf of the Registrant, and Brian O'Higgins.
10.11* Letter Agreement, dated as of November 18, 1996, between Northern
Telecom Limited, on behalf of the Registrant, and Bradley N. Ross.
10.12* Letter Agreement, dated as of June 4, 1997, between the Registrant and
Richard D. Spurr.
10.13* Letter Agreement, dated as of November 14, 1997, between the
Registrant and Hansen Downer.
10.14+ Amended and Restated 1996 Stock Incentive Plan.
10.15* Standard Office Building Lease Agreement, dated as of July 11, 1997,
between G&F International, Inc. and the Registrant.
10.16* Lease Agreement, dated as of January 28, 1998, between Colonnade
Development Incorporated and Entrust Technologies Limited.
10.17 1998 Employee Stock Purchase Plan.
21* Subsidiaries of the Registrant.
23.1 Consent of Hale and Dorr LLP (included in Exhibit 5).
23.2 Consent of Deloitte & Touche Chartered Accountants.
23.3 Consent of Willi & Partner AG.
24* Power of Attorney.
27* Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
** To be filed by amendment.
+ Superseding exhibit.

(B) Financial Statement Schedules

All schedules have been omitted because they are not required or because the
required information is given in the Registrant's Financial Statements or
Notes thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Articles of
Incorporation of the Registrant, the laws of the State of Maryland and the
Bylaws of NTL, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

II-4
<PAGE>

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-5
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN RICHARDSON, TEXAS
ON THIS 24 DAY OF JULY, 1998.

Entrust Technologies Inc.

By: /s/ John A. Ryan
----------------------------------
JOHN A. RYAN
President and Chief Executive
Officer

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE

/s/ John A. Ryan President and Chief July 24, 1998
- ------------------------------------- Executive Officer
JOHN A. RYAN (Principal
Executive Officer)

*
- ------------------------------------- Senior Vice July 24, 1998
MICHELE L. AXELSON President, Business
Development and
Finance and Chief
Financial Officer
(Principal
Financial and
Accounting Officer)

*
- ------------------------------------- Director July 24, 1998
DAVID D. ARCHIBALD

*
- ------------------------------------- Director July 24, 1998
FRANK A. DUNN

* Director July 24, 1998
- -------------------------------------
F. WILLIAM CONNER

*
- ------------------------------------- Director July 24, 1998
ROBERT S. MORRIS

*By: /s/ John A. Ryan
- -------------------------------------
JOHN A. RYAN
Attorney-in-Fact
<S> <C>
</TABLE>

II-6
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
1.2 Form of International Underwriting Agreement.
2.1* Asset Transfer Agreement, dated as of December 31, 1996, between the
Registrant and Northern Telecom Inc.
2.2* Asset Transfer Agreement, dated as of December 31, 1996, between
Entrust Technologies Limited and Northern Telecom Limited.
2.3+ Share Purchase Agreement, dated as of May 30, 1998, as amended,
between the Registrant and Rainer A. Rueppel.
2.4* Share Purchase Agreement, dated as of May 30, 1998, as amended,
between the Registrant and Invision AG.
2.5+ Form of Share Purchase Agreement between the Registrant and the
minority stockholders of r/3/ Security Engineering AG.
3.1* Articles of Incorporation of the Registrant, as amended.
3.2* Amended and Restated Articles of Incorporation of the Registrant (to
be effective upon the closing of the offerings).
3.3* Bylaws of the Registrant.
3.4* Amended and Restated Bylaws of the Registrant (to be effective upon
the closing of the offerings).
4.1 Specimen certificate for shares of Common Stock.
5 Opinion of Hale and Dorr LLP.
10.1* Series B Common Stock Purchase Agreement, dated as of December 31,
1996, by and among the Registrant, Northern Telecom Limited and
certain stockholders.
10.2* Series B Non-Voting Common Stock Purchase Agreement, dated as of
January 31, 1997, by and among the Registrant and Societe Generale
Investment Corporation.
10.3** Amended and Restated Registration Rights Agreement, dated as of July
, 1998, by and among the Registrant and certain stockholders.
10.4* Stockholders' Agreement, dated as of December 31, 1996, by and among
the Registrant, Northern Telecom Inc., Northern Telecom Limited and
certain stockholders, as amended by the Stockholder Agreement and
Waiver, dated as of January 31, 1997, by and among the Registrant and
certain stockholders.
10.5 Strategic Alliance Agreement, dated as of December 31, 1996, between
the Registrant and Northern Telecom Limited.
10.6* Services Agreement, dated as of December 31, 1996, between the
Registrant and Northern Telecom Limited.
10.7* Support Agreement, dated as of December 31, 1996, between the
Registrant and Entrust Technologies Limited.
10.8* Share Exchange Agreement, dated as of December 31, 1996, among the
Registrant, Entrust Technologies Limited and Northern Telecom Limited.
</TABLE>

<PAGE>

EXHIBIT 1.1
ENTRUST TECHNOLOGIES INC.

COMMON STOCK ($0.01 PAR VALUE PER SHARE)

UNDERWRITING AGREEMENT
(U.S. VERSION)

---------------------------
, 1998.

Goldman, Sachs & Co.
Donaldson, Lufkin & Jenrette Securities Corporation
NationsBanc Montgomery Securities LLC
Warburg Dillon Read LLC, a subsidiary of UBS AG
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004

Ladies and Gentlemen:

Entrust Technologies Inc., a Maryland corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of 4,320,000 shares of Common Stock, $0.01 par value ("Stock"), of the Company,
and the Stockholders of the Company named in Schedule II hereto (the "Selling
Stockholders") propose, subject to the terms and conditions stated herein, to
sell the Underwriters an aggregate of 1,333,334 shares and, at the election of
the Underwriters, up to an additional 848,000 shares of Stock. The aggregate of
5,653,334 shares to be sold by the Company and the Selling Stockholders is
herein called the "Firm Shares" and the aggregate of 848,000 additional shares
to be sold by the Selling Stockholders is herein called the "Optional Shares".
The Firm Shares and the Optional Shares that the Underwriters elect to purchase
pursuant to Section 2 hereof are herein collectively called the "Shares".

It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of 1,625,333 shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International, Donaldson,
Lufkin & Jenrette International, NationsBanc Montgomery Securities LLC and
Warburg Dillon Read, a division of UBS AG, are acting as lead managers. Anything
herein or therein to the contrary notwithstanding, the respective closings under
this Agreement and the International Agreement are hereby expressly made
conditional on one another. The Underwriters hereunder and the International
Underwriters are simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between Syndicates") which
provides, among other things, for the transfer of shares of Stock between the
two syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for certain
substitute pages as included in the registration statement and amendments
thereto as mentioned below. Except as used in Sections 2, 3, 4, 9 and 11 herein,
<PAGE>

and except as the context may otherwise require, references hereinafter to the
Shares shall include all the shares of Stock which may be sold pursuant to
either this Agreement or the International Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the U.S. and the
international versions thereof.

1. (a) The Company and Entrust Technologies Limited, a Canadian
corporation and the Company's majority-owned subsidiary ("Entrust Limited"),
jointly and severally represent and warrant to, and agree with, each of the
Underwriters that:

(i) A registration statement on Form S-1 (File No. 333-57275)
(the "Initial Registration Statement") in respect of the Shares has
been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any post-
effective amendment thereto, each in the form heretofore delivered to
you, and, excluding exhibits thereto, to you for each of the other
Underwriters, have been declared effective by the Commission in such
form; other than a registration statement, if any, increasing the size
of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act"), which became effective upon filing, no other document
with respect to the Initial Registration Statement has heretofore been
filed with the Commission; and no stop order suspending the
effectiveness of the Initial Registration Statement, any post-
effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been
initiated or threatened by the Commission (any preliminary prospectus
included in the Initial Registration Statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations of the
Commission under the Act is hereinafter called a "Preliminary
Prospectus"; the various parts of the Initial Registration Statement
and the Rule 462(b) Registration Statement, if any, including all
exhibits thereto and including the information contained in the form
of final prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and deemed by
virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective or such
part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of
the Initial Registration Statement became effective, are hereinafter
collectively called the "Registration Statement"; and such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus").

(ii) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain an untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Items 7 and 11(m) of Form S-1;

-2-
<PAGE>

(iii) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will conform, in all material respects, to the
requirements of the Act and the rules and regulations of the
Commission thereunder and do not and will not, as of the applicable
effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and
any amendment or supplement thereto, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by an
Underwriter through Goldman, Sachs & Co. expressly for use therein or
by a Selling Stockholder expressly for use in the preparation of the
answers therein to Items 7 and 11(m) of Form S-1;

(iv) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock (other
than as a result of the grant or exercise of stock options pursuant to
the Company's employee stock option plans described in the Prospectus)
or long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs,
management, business, properties, financial position, stockholders'
equity or results of operations of the Company and its subsidiaries
taken as a whole, otherwise than as set forth or contemplated in the
Prospectus;

(v) The Company and its subsidiaries have good and valid title
in fee simple to all real property and good and valid title to all
personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries; and any
real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries;

(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Maryland, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus,
and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties or conducts
any business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each subsidiary of the

-3-
<PAGE>

Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation;

(vii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of
the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description of the
Stock contained in the Prospectus; and all of the issued shares of
capital stock of each subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and non-assessable and
(except for directors' qualifying shares and except as set forth in
the Prospectus) are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims;

(viii) The Shares to be issued and sold by the Company to the
Underwriters hereunder and under the International Underwriting
Agreement have been duly and validly authorized and, when issued and
delivered against payment therefor as provided herein and in the
International Underwriting Agreement, will be duly and validly issued
and fully paid and non-assessable and will conform to the description
of the Stock contained in the Prospectus;

(ix) The issue and sale of the Shares by the Company hereunder
and under the International Underwriting Agreement and the compliance
by the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the Articles of
Incorporation or By-laws of the Company, any statute or any rule or
regulation of any governmental agency or regulatory body having
jurisdiction over the Company or any of its subsidiaries or any of
their properties or any order or decree of any court that specifically
names the Company or any of its subsidiaries or any of their
properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or regulatory body is required for the issue and
sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the International
Underwriting Agreement, except the registration under the Act of the
Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under foreign or state securities or
Blue Sky laws and the approval by the National Association of
Securities Dealers, Inc. of the underwriting terms and arrangements in
connection with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters;

(x) Neither the Company nor any of its subsidiaries is (i) in
violation of its charter or By-laws or (ii) in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, except for
such defaults which, individually or in the aggregate, have not had,
and are not

-4-
<PAGE>

reasonably likely to result in, any material adverse effect on the
business, properties, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect").

(xi) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute
a summary of the terms of the Stock, under the caption "Certain U.S.
Tax Considerations Applicable to Non-U.S. Holders of the Common
Stock", insofar as they purport to describe the provisions of the laws
referred to therein, and under the caption "Underwriting", insofar as
they purport to describe the provisions of the documents referred to
therein, are accurate summaries and descriptions of such terms and
provisions in all material respects;

(xii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse Effect; and,
to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened
by others;

(xiii) Other than as set forth in the Prospectus, the Company and
its subsidiaries have sufficient interests in all patents,
trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes ("Intellectual
Property") necessary for their business as described in the Prospectus
and, to the Company's knowledge, necessary in connection with the
products and services under development, without any conflict with or
infringement of the interests of others, except for such conflicts
which, individually or in the aggregate, have not had and are not
reasonably likely to result in, a Material Adverse Effect, and have
taken all reasonable steps necessary to secure interests in such
Intellectual Property from their contractors; except as set forth in
the Prospectus, the Company is not aware of outstanding options,
licenses or agreements of any kind relating to the Intellectual
Property of the Company which are required to be set forth in the
Prospectus, and, except as set forth in the Prospectus, neither the
Company nor any of its subsidiaries is a party to or bound by any
options, licenses or agreements with respect to the Intellectual
Property of any other person or entity which are required to be set
forth in the Prospectus; none of the technology employed by the
Company has been obtained or is being used by the Company or its
subsidiaries in violation of any contractual fiduciary obligation
binding on the Company or any of its subsidiaries or any of its
directors or executive officers or, to the Company's knowledge, any of
its employees or otherwise in violation of the rights of any persons;
except as disclosed in the Prospectus, neither the Company nor any of
its subsidiaries has received any written or, to the Company's
knowledge, oral communications alleging that the Company or any of its
subsidiaries has violated, infringed or conflicted with, or, by
conducting its business as set forth in the Prospectus, would violate,
infringe or conflict with any of the Intellectual Property of any
other person or entity other than any such violations, infringements
or conflicts which, individually or in the aggregate, have not had,
and are not reasonably likely to result in a Material Adverse Effect;
and the Company and its subsidiaries have taken and will maintain
reasonable measures to prevent the unauthorized dissemination or
publication of their confidential

-5-
<PAGE>

information and, to the extent contractually required to do so, the
confidential information of third parties in their possession;

(xiv) The Company maintains insurance of the types and in the
amounts generally deemed adequate for its business, including, but not
limited to, business interruption insurance, insurance covering real
and personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect;

(xv) There are no contracts, other documents or other agreements
required to be described in the Registration Statement or to be filed
as exhibits to the Registration Statement by the Act or by the rules
and regulations thereunder which have not been described or filed as
required; the contracts so described in the Prospectus are in full
force and effect on the date hereof; and neither the Company nor, to
the Company's knowledge, any other party is in breach of or default
under any of such contracts other than such breaches or defaults
which, individually or in the aggregate, have not had, and are not
reasonably likely to result in, a Material Adverse Effect;

(xvi) Except as described in or contemplated by the Prospectus,
the Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or
foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such subsidiary has
received any notice of proceedings relating to the revocation or
modification of, or failure to obtain, any such certificate,
authorization or permit which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect;

(xvii) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or an entity "controlled" by an "investment company", as such terms
are defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");

(xviii) Each of Deloitte & Touche Chartered Accountants, who have
certified certain financial statements of the Company and its
subsidiaries, and Willi and Partner AG, who has certified financial
statements of r/3/ Security Engineering AG ("r/3/"), the Company's
Swiss subsidiary, are independent public accountants as required by
the Act and the rules and regulations of the Commission thereunder;

(xix) The Shares have been approved for listing on the Nasdaq
National Market, subject to official notice of issuance; and

(xx) Except as described in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Shares registered pursuant to the Registration
Statement, and the right of each person who is a party to any
contract, agreement or understanding so described to include such
securities pursuant to the Registration Statement has been effectively
satisfied or waived.

-6-
<PAGE>

(b) Each of the Selling Stockholders severally represents and
warrants to, and agrees with, each of the Underwriters and the Company
that:

(i) All consents, approvals, authorizations and orders necessary
for the execution and delivery by such Selling Stockholder of this
Agreement, the International Underwriting Agreement and, for the
Selling Stockholders listed in Part B of Schedule II, the Power of
Attorney and the Custody Agreement hereinafter referred to, and for
the sale and delivery of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement, have been obtained; and such Selling Stockholder has full
right, power and authority to enter into this Agreement, the
International Underwriting Agreement, the Power of Attorney and the
Custody Agreement and to sell, assign, transfer and deliver the Shares
to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement;

(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement and the compliance by such Selling Stockholder with all of
the provisions of this Agreement and the International Underwriting
Agreement, and, for the Selling Stockholders listed in Part B of
Schedule II, the Power of Attorney and the Custody Agreement, and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute,
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action
result in any violation of the provisions of any statute, rule or
regulation of any governmental agency or regulatory body having
jurisdiction over such Selling Stockholder or the property of such
Selling Stockholder or any order or decree of any court that
specifically names such Selling Stockholder or any of its subsidiaries
or any of their properties, except in each case as would not adversely
affect the ability of such Selling Stockholder to consummate the
transactions contemplated by this Agreement and the International
Underwriting Agreement;

(iii) Such Selling Stockholder has, and immediately prior to
each Time of Delivery (as defined in Section 4 hereof) such Selling
Stockholder will have, good and valid title to the Shares to be sold
by such Selling Stockholder hereunder, free and clear of all liens,
encumbrances, equities or claims; and, assuming that the Underwriters
purchase the Shares to be sold by such Selling Stockholder for value,
in good faith and without notice of any adverse claim within the
meaning of the Uniform Commercial Code, upon delivery of such Shares
and payment therefor pursuant hereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims,
will pass to the several Underwriters;

(iv) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, such Selling Stockholder will not, without your prior
written consent (A) offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder and under the International
Underwriting Agreement, any securities of the Company that are
substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such

-7-
<PAGE>

substantially similar securities (other than upon the conversion or
exchange of convertible or exchangeable securities outstanding as of
the date of this Agreement), other than transfers to such Selling
Stockholder's affiliates, as such term is defined in Rule 405
promulgated under the Securities Act, provided that each transferee
agrees in writing to be bound by the terms of this clause or (B)
engage directly or indirectly in any transaction the likely result of
which would involve a transaction prohibited by subclause (A) of this
clause (iv);

(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares;

(vi) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did not, and the Prospectus
and any further amendments or supplements to the Registration
Statement and the Prospectus, when they become effective or are filed
with the Commission, as the case may be, will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading;

(vii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof) if such Selling Stockholder is a
corporation, partnership or other entity organized in the United
States, or a properly completed and executed United States Treasury
Department Form W-8 and Form 1001, if such Selling Stockholder is a
corporation organized outside the United States; and

(viii) For each Selling Stockholder listed on Part B of Schedule
II hereof, (A) certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder have been
placed in custody under a Custody Agreement, in the form heretofore
furnished to you (the "Custody Agreement"), duly executed and
delivered by such Selling Stockholder to the Company, as custodian
(the "Custodian"), and such Selling Stockholder has duly executed and
delivered a Power of Attorney, in the form heretofore furnished to you
(the "Power of Attorney"), appointing the persons indicated in
Schedule II hereto, and each of them, as such Selling Stockholder's
attorneys-in-fact (the "Attorneys-in-Fact") with authority to execute
and deliver this Agreement and the International Underwriting
Agreement on behalf of such Selling Stockholder, to determine the
purchase price to be paid by the Underwriters to the Selling
Stockholders as provided in Section 2 hereof, to authorize the
delivery of the Shares to be sold by such Selling Stockholder
hereunder and otherwise to act on behalf of such Selling Stockholder
in connection with the transactions contemplated by this Agreement,
the International Underwriting Agreement and the Custody Agreement;
and

-8-
<PAGE>

(B) The Shares represented by the certificates held in custody
for such Selling Stockholder under the Custody Agreement, as a result
of the obligations of such Selling Stockholder under this Agreement,
are subject to the interests of the Underwriters hereunder and the
International Underwriters under the International Underwriting
Agreement; the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent
irrevocable; the obligations of the Selling Stockholders hereunder and
under the International Underwriting Agreement shall not be terminated
by operation of law, whether by the dissolution of any Selling
Stockholder that is a partnership, limited liability company or
corporation, or by the occurrence of any other event; if any such
Selling Stockholder should be dissolved, or if any other such event
should occur, before the delivery of the Shares hereunder,
certificates representing the Shares shall be delivered by or on
behalf of the Selling Stockholders in accordance with the terms and
conditions of this Agreement, of the International Underwriting
Agreement and of the Custody Agreements; and actions taken by the
Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid
as if such dissolution or other event had not occurred, regardless of
whether or not the Custodian, the Attorneys-in-Fact, or any of them,
shall have received notice of such dissolution or other event.

2. Subject to the terms and conditions herein set forth, (a) the Company
and each of the Selling Stockholders agree, severally and not jointly, to sell
to each of the Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and each of the Selling Stockholders,
at a purchase price per share of $___, the number of Firm Shares (to be adjusted
by you so as to eliminate fractional shares) determined by multiplying the
aggregate number of Firm Shares to be sold by the Company and each of the
Selling Stockholders as set forth opposite their respective names in Schedule II
hereto by a fraction, the numerator of which is the aggregate number of Firm
Shares to be purchased by such Underwriter as set forth opposite the name of
such Underwriter in Schedule I hereto and the denominator of which is the
aggregate number of Firm Shares to be purchased by all of the Underwriters from
the Company and all of the Selling Stockholders hereunder and (b) in the event
and to the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, each of the Selling Stockholders agrees,
severally and not jointly, to sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from each of the
Selling Stockholders, at the purchase price per share set forth in clause (a) of
this Section 2, that portion of the number of Optional Shares as to which such
election shall have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of Optional Shares by a
fraction, the numerator of which is the maximum number of Optional Shares which
such Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.

The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 848,000 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering overallotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares shall be made in proportion to the maximum number of
Optional Shares to be sold by each Selling Stockholder as set forth in Schedule
II hereto. Any such election to purchase Optional Shares may be exercised only
by written notice from you to the Company and the Attorneys-in-Fact, given
within a period of 30 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Shares to be purchased and the date on
which such

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<PAGE>

Optional Shares are to be delivered, as determined by you but in no event
earlier than the First Time of Delivery (as defined in Section 4 hereof) or,
unless you and the Company and the Attorneys-in-Fact otherwise agree in writing,
earlier than two or later than ten business days after the date of such notice.

3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.

4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders, shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co.,
through the facilities of the Depository Trust Company ("DTC"), for the account
of such Underwriter, against payment by or on behalf of such Underwriter of the
purchase price therefor by wire transfer of Federal (same-day) funds to the
account specified by the Company and each Selling Stockholder to Goldman, Sachs
& Co. at least forty-eight hours in advance. The Company and each Selling
Stockholder will cause the certificates representing the Shares to be made
available for checking and packaging at least twenty-four hours prior to the
Time of Delivery (as defined below) with respect thereto at the office of DTC or
its designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New
York City time, on ___________, 1998 or such other time and date as Goldman,
Sachs & Co., the Company and the Selling Stockholders may agree upon in writing,
and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date
specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs
& Co. of the Underwriters' election to purchase such Optional Shares, or such
other time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called
the "First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".

(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 hereof, including the cross receipt
for the Shares and any additional documents requested by the Underwriters
pursuant to Section 7(o) hereof, will be delivered at the offices of Hale and
Dorr LLP, 60 State Street, Boston, Massachusetts 02109 (the "Closing
Location"), and the Shares will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at
______ p.m., New York City time, on the New York Business Day next preceding
such Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.

5. The Company and Entrust Limited jointly and severally agree with each
of the Underwriters:

(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier
time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after reasonable
notice thereof;

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<PAGE>

to advise you, promptly after it receives notice thereof, of the time when
any amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has
been filed and to furnish you with copies thereof; to advise you, promptly
after it receives notice thereof, of the issuance by the Commission of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus, of the suspension of the
qualification of the Shares for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information; and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to
obtain the withdrawal of such order;

(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in
such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;

(c) Prior to 12:00 Noon, New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to
furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months
after the time of issue of the Prospectus in connection with the offering
or sale of the Shares and if at such time any event shall have occurred as
a result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made when such Prospectus
is delivered, not misleading, or, if for any other reason it shall be
necessary during such period to amend or supplement the Prospectus in order
to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in securities
as many copies as you may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue
of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as
you may request of an amended or supplemented Prospectus complying with
Section 10(a)(3) of the Act;

(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations thereunder (including, at the option of the Company,
Rule 158);

(e) During the period beginning from the date hereof and continuing
to and including the date 180 days after the date of the Prospectus, (A)
not to offer, sell, contract

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<PAGE>

to sell or otherwise dispose of, except as provided hereunder and under the
International Underwriting Agreement, any securities of the Company that
are substantially similar to the Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that represent
the right to receive, Stock or any such substantially similar securities;
provided, however, that the Company may (i) issue shares upon the exercise
of options granted pursuant to its Amended and Restated 1996 Stock
Incentive Plan and 1998 Employee Stock Purchase Plan, (ii) issue shares
upon the conversion or exchange of convertible or exchangeable securities
outstanding as of the date of this Agreement, (iii) issue shares in
connection with a merger or the acquisition by the Company of the assets or
capital stock of another person or entity so long as the shares so issued
by the Company may not be resold for a period of 180 days after the date of
the Prospectus and (iv) grant options and offer to sell shares of Common
Stock to its employees, consultants and directors pursuant to the plans
listed in clause (i) and (B) not to amend or waive compliance with Section
5 under each Stock Option Agreement entered into by the Company and a
holder of options granted under the Company's employee stock option plans);

(f) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company
and its consolidated subsidiaries certified by independent public
accountants);

(g) During a period of five years from the effective date of the
Registration Statement, to furnish to you at your request copies of all
reports or other communications (financial or other) furnished to
stockholders, and to deliver to you (i) as soon as they are available,
copies of any reports and financial statements furnished to or filed with
the Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as you may
from time to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission);

(h) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use
of Proceeds";

(i) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market ("NASDAQ");

(j) To file with the Commission such information on Form 10-Q or Form
10-K as may be required by Rule 463 under the Act; and

(k) If the Company elects to rely upon Rule 462(b), the Company shall
file a Rule 462(b) Registration Statement with the Commission in compliance
with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this
Agreement, and the Company shall at the time of filing either pay to the
Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.

6. The Company and each of the Selling Stockholders covenant and agree
with one another and with the several Underwriters that (a) the Company will pay
or cause to be paid the

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<PAGE>

following: (i) the fees, disbursements and expenses of the Company's counsel and
accountants in connection with the registration of the Shares under the Act and
all other expenses in connection with the preparation, printing and filing of
the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling Agreement, the Blue Sky
Memorandum, closing documents (including compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Shares; (iii) all expenses in connection with the qualification of the Shares
for offering and sale under state securities laws as provided in Section 5(b)
hereof, including the fees and disbursements of counsel for the Underwriters in
connection with such qualification and in connection with the Blue Sky survey;
(iv) all fees and expenses in connection with listing the Shares on the NASDAQ;
(v) the filing fees incident to, and the fees and disbursements of counsel for
the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of the
Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section; and (b) such Selling
Stockholder will pay or cause to be paid all costs and expenses incident to the
performance of such Selling Stockholder's obligations hereunder and under the
International Underwriting Agreement which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses of counsel for
such Selling Stockholder, (ii) for each Selling Stockholder listed in Part B of
Schedule II, such Selling Stockholder's pro rata share of fees and expenses of
the Attorneys-in-Fact and the Custodian, and (iii) all expenses and taxes
incident to the sale and delivery of the Shares to be sold by such Selling
Stockholders to the Underwriters hereunder. It is understood, however, that the
Company shall bear, and the Selling Stockholders shall not be required to pay or
to reimburse the Company for, the cost of any other matters not directly
relating to the sale and purchase of the Shares pursuant to this Agreement and
the International Underwriting Agreement, and that, except as provided in this
Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel, stock transfer
taxes on resale of any of the Shares by them, and any advertising expenses
connected with any offers they may make.

7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and the Selling Stockholders herein are, at and as of such Time of
Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its obligations hereunder theretofore
to be performed, and the following additional conditions:

(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424(b) within the applicable time period prescribed for such filing
by the rules and regulations under the Act and in accordance with Section
5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule
462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceeding for that purpose shall
have been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to your reasonable satisfaction;

(b) Ropes & Gray, counsel for the Underwriters, shall have furnished
to you such written opinion or opinions (a draft of such opinion is
attached as Annex II(a) hereto), dated

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<PAGE>

as of such Time of Delivery, with respect to the matters covered in
paragraphs (i), (ii) (as to the Shares being delivered at such Time of
Delivery), (v), (viii) and (x) of subsection (c) below as well as such
other related matters as you may reasonably request, and such counsel shall
have received such papers and information as they may reasonably request to
enable them to pass upon such matters;

(c) Hale and Dorr LLP, counsel for the Company, shall have furnished
to you their written opinion (a draft of such opinion is attached as Annex
II(b) hereto), dated as of such Time of Delivery, in form and substance
satisfactory to you, to the effect that:

(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Maryland, with corporate power and authority to own its properties
and conduct its business, as such properties and business are
described in the Prospectus;

(ii) The Company has the authorized, issued and outstanding
capital stock as set forth in the Prospectus, and all of the issued
shares of capital stock of the Company (including the Shares being
delivered at such Time of Delivery) have been duly and validly
authorized and issued and are fully paid and nonassessable; and the
Shares conform, or when issued, delivered and paid for in accordance
with the terms of this Agreement and the International Underwriting
Agreement will conform, in all material respects, to the description
of the Stock contained in the Prospectus;

(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing in
each of the jurisdictions listed in Schedule III hereto, which are the
only jurisdictions in the United States in which the Company owns or
leases real property or maintains an office;

(iv) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened to which the Company or
any of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which are required
to be described in the Prospectus which are not described in the
Prospectus;

(v) This Agreement and the International Underwriting Agreement
have been duly authorized, executed and delivered by the Company;

(vi) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company with
all of the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument binding upon the Company or any of
its subsidiaries that is an exhibit to the Registration Statement, nor
will such action result in any violation of the provisions of the
Articles of Incorporation or By-laws of the Company or (assuming
compliance with all applicable foreign and state securities and Blue
Sky laws) any statute, rule or regulation known to such counsel of any
governmental agency or regulatory body having jurisdiction over the
Company or any of its subsidiaries or any of their properties or any
order or decree

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<PAGE>

known to such counsel of any court specifically naming the Company or
any of its subsidiaries or any of their properties;

(vii) No consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or
regulatory body is required for the issue and sale of the Shares or
the consummation by the Company of the transactions contemplated by
this Agreement and the International Underwriting Agreement, except
the registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under foreign or state securities or Blue Sky laws and the
approval by the National Association of Securities Dealers, Inc. of
the underwriting terms and arrangements in connection with the
purchase and distribution of the Shares by the Underwriters and the
International Underwriters;

(viii) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, under the caption
"Certain U.S. Tax Considerations Applicable to Non-U.S. Holders of the
Common Stock", insofar as they purport to describe the provisions of
the laws referred to therein, and under the caption "Underwriting",
insofar as they purport to describe the documents referred to therein,
are accurate summaries and descriptions of such terms and provisions
in all material respects;

(ix) The Company is not an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in
the Investment Company Act; and

(x) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior
to such Time of Delivery (other than the financial statements,
including the notes and schedules thereto, and other financial and
accounting data, as to which such counsel need express no opinion)
comply as to form in all material respects with the requirements of
the Act and the rules and regulations thereunder, although they do not
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectus; they have no reason to believe that, as of its effective
date, the Registration Statement or any further amendment thereto made
by the Company prior to such Time of Delivery (other than the
financial statements, including the notes and schedules thereto, and
other financial and accounting data, as to which such counsel need
express no opinion) contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that, as of
its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than
the financial statements, including the notes and schedules thereto,
and other financial and accounting data, as to which such counsel need
express no opinion) contained an untrue statement of a material fact

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<PAGE>

or omitted to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading or that, as of such Time of Delivery, the Prospectus or
any further supplement thereto made by the Company prior to such Time
of Delivery (other than the financial statements, including the notes
and schedules thereto, and other financial and accounting data, as to
which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and they do
not know of any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character required
to be filed as an exhibit to the Registration Statement or required to
be described in the Registration Statement or the Prospectus which are
not filed or described as required;

(d) Davies, Ward & Beck and Bar and Karrer, counsel to the Company,
shall have furnished to you its written opinion, dated as of such Time of
Delivery, in form and substance satisfactory to you, to the effect that
Entrust Limited and r/3/, respectively, has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued shares of capital
stock of each such subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for directors'
qualifying shares and except as otherwise set forth in the Prospectus) are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of local counsel and in
respect to matters of fact upon certificates of officers of the Company or
its subsidiaries, provided that such counsel shall state that they believe
that both you and they are justified in relying upon such opinions and
certificates);

(e) Jay Kendry, Esq., general counsel to the Company, shall have
furnished to you his written opinion, dated as of such Time of Delivery, in
form and substance satisfactory to you, to the effect that the issue and
sale of the Shares being delivered at such Time of Delivery by the Company
and the compliance by the Company with all of the provisions of this
Agreement and the International Underwriting Agreement and the consummation
of the transactions herein and therein contemplated will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject;

(f) _________, intellectual property counsel for the Company, shall
have furnished to you their written opinion (a draft of each such opinion
is attached as Annex II(c) hereto), dated as of such Time of Delivery, in
form and substance reasonably satisfactory to you, with respect to such
matters as you may reasonably request;

(g) The respective counsel for each of the Selling Stockholders, as
indicated in Schedule II hereto, each shall have furnished to you their
written opinion with respect to each of the Selling Stockholders for whom
they are acting as counsel, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:

(i) For each Selling Stockholder listed in Part B of Schedule
II, a Power-of-Attorney and a Custody Agreement dated as of the date
of this Agreement have been duly executed and delivered by such
Selling Stockholder and constitute valid and binding agreements of
such Selling Stockholder in accordance with their terms;

(ii) Each of this Agreement and the International Underwriting
Agreement has been duly executed and delivered by or on behalf of such
Selling Stockholder;

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<PAGE>

and the sale of the Shares to be sold by such Selling Stockholder
hereunder and thereunder and the compliance by such Selling
Stockholder with all of the provisions of this Agreement, the
International Underwriting Agreement, and, for each Selling
Stockholder listed in Part B of Schedule II, the Power-of-Attorney and
the Custody Agreement and the consummation of the transactions herein
and therein contemplated will not conflict with or result in a breach
or violation of any terms or provisions of, or constitute a default
under, any statute, indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument known to such counsel to which such
Selling Stockholder is a party or by which such Selling Stockholder is
bound or to which any of the property or assets of such Selling
Stockholder is subject, nor will such action result in any violation
of the provisions of any rule or regulation known to such counsel of
any governmental agency or regulatory body having jurisdiction over
such Selling Stockholder or the property of such Selling Stockholder
or of an order or decree known to such counsel of any court
specifically naming such Selling Stockholder or any of its properties,
except in each case as would not adversely affect the ability of such
Selling Stockholder to consummate the transactions contemplated by
this Agreement and the International Underwriting Agreement;

(iii) No consent, approval, authorization or order of any court
or governmental agency or body is required for the consummation of the
transactions contemplated by this Agreement and the International
Underwriting Agreement in connection with the Shares to be sold by
such Selling Stockholder hereunder and thereunder, except the
registration under the Act of the Shares, and such consents,
approvals, authorizations, registrations or qualifications as may be
required under foreign or state securities or Blue Sky laws and the
approval by the National Association of Securities Dealers, Inc. of
the underwriting terms and arrangements in connection with the
purchase and distribution of such Shares by the Underwriters and
International Underwriters;

(iv) Immediately prior to any Time of Delivery, such Selling
Stockholder (A) is the owner of record and, to such counsel's
knowledge, the beneficial owner of the Shares to be sold at such Time
of Delivery by such Selling Stockholder under this Agreement and the
International Underwriting Agreement, and (B) has the full corporate
right, power and authority to sell, assign, transfer and deliver valid
and unencumbered title to the Shares to be sold by such Selling
Stockholder hereunder; and

(v) Assuming that the Underwriters purchase the Shares to be
sold by such Selling Stockholder for value, in good faith and without
notice of any adverse claim within the meaning of the Uniform
Commercial Code, upon delivery and payment for the Shares to be sold
by such Selling Stockholder, the Underwriters will receive valid title
to such Shares, free and clear of all liens, encumbrances, equities or
claims.

In rendering the opinion in paragraph (iv), such counsel may rely upon a
certificate of such Selling Stockholder in respect of matters of fact as to
ownership of, and liens, encumbrances, equities or claims on, the Shares sold by
such Selling Stockholder, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such certificate
and that an original of such certificate is delivered to you;

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<PAGE>

(h) On the date of the Prospectus at a time prior to the execution of
this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent
to the date of this Agreement and also at each Time of Delivery, Deloitte &
Touche Chartered Accountants shall have furnished to you a letter or
letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you, to the effect set forth in Annex I hereto;

(i) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus,
and (ii) since the respective dates as of which information is given in the
Prospectus there shall not have been any change in the capital stock (other
than as a result of the grant or exercise of stock options pursuant to the
Company's employee stock option plans described in the Prospectus) or long-
term debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general
affairs, business, properties, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in Clause (i)
or (ii), is in the judgment of the Representatives so material and adverse
as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of
Delivery on the terms and in the manner contemplated in the Prospectus;

(j) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and
(ii) no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of
any of the Company's debt securities;

(k) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ; (ii) a
suspension or material limitation in trading in the Company's securities on
NASDAQ; (iii) a general moratorium on commercial banking activities
declared by either Federal or New York or Massachusetts State authorities;
or (iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this Clause (iv) in the
judgment of the Representatives makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;

(l) The Shares to be sold at the such Time of Delivery shall have
been duly listed for quotation on NASDAQ, subject to official notice of
issuance;

(m) The Company has obtained and delivered to the Underwriters (A)
executed copies of an agreement from each director, officer and stockholder
of the Company, substantially to the effect set forth in Subsection 5(e)
hereof in form and substance satisfactory to you and (B) executed copies of
a Stock Option Agreement from each holder

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<PAGE>

of options granted under the Company's employee stock option plans, which
agreement shall contain a provision substantially to the effect set forth
in Subsection 5(e) hereof;

(n) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement; and

(o) The Company and the Selling Stockholders shall have furnished or
caused to be furnished to you at such Time of Delivery certificates of
officers of the Company and the Selling Stockholders, respectively,
satisfactory to you as to the accuracy of the representations and
warranties of the Company and the Selling Stockholders, respectively herein
at and as of such Time of Delivery, as to the performance by the Company
and the Selling Stockholders, of all of their respective obligations
hereunder and under the International Underwriting Agreement to be
performed at or prior to such Time of Delivery and as to such other matters
as you may reasonably request and the Company shall have furnished or
caused to be furnished certificates as to the matters set forth in
subsections (a) and (i) of this Section.

8. (a) The Company, Entrust Limited and Northern Telecom Limited (the
"Indemnifying Person"), jointly and severally, will indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company and the Indemnifying
Person shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through Goldman, Sachs & Co.
expressly for use therein; provided, further that the liability of the
Indemnifying Person pursuant to this subsection (a) shall not exceed the product
of the number of Shares sold by such Indemnifying Person and the initial public
offering price less underwriting discount of the Shares, as set forth in the
Prospectus.

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<PAGE>

Stockholder expressly for use therein, and such Selling Stockholder will
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending any such
action or claim as such expenses are incurred; provided, however, that the
liability of a Selling Stockholder pursuant to this subsection (b) shall not
exceed the product of the number of Shares sold by such Selling Stockholder and
the initial public offering price less the underwriting discount of the Shares,
as set forth in the Prospectus.

(c) Each Underwriter will indemnify and hold harmless the Company and each
Selling Stockholder against any losses, claims, damages or liabilities to which
the Company or such Selling Stockholder may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in any Preliminary Prospectus, the Registration
Statement or the Prospectus or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and will
reimburse the Company and each Selling Stockholder for any legal or other
expenses reasonably incurred by the Company or such Selling Stockholder in
connection with investigating or defending any such action or claim as such
expenses are incurred.

(d) Promptly after receipt by an indemnified party under subsection (a),
(b) or (c) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.

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<PAGE>

as is appropriate to reflect the relative benefits received by the Company and
the Selling Stockholders on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under subsection (d) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Selling Stockholders on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Shares purchased under this Agreement (before deducting
expenses) received by the Company and the Selling Stockholders bear to the total
underwriting discounts and commissions received by the Underwriters with respect
to the Shares purchased under this Agreement, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Selling
Stockholders on the one hand or the Underwriters on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, each of the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (e). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (e),
(i) no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission and (ii)
no Selling Stockholder shall be required to contribute any amount in excess of
the product of the number of Shares sold by such Selling Stockholder and the
initial public offering price less underwriting discount of the Shares as set
forth in the Prospectus. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint.

(f) The obligations of the Company, Entrust Limited and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company and the respective Selling Stockholders may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and the
Selling Stockholders (including any person who, with his or her consent, is
named in the Registration Statement as about to become a director of the
Company) and to each person, if any, who controls the Company or the Selling
Stockholders within the meaning of the Act.

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<PAGE>

9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties satisfactory to you to purchase such Shares on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the Selling Stockholders that you have so arranged for the purchase of such
Shares, or the Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company shall have the
right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.

(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of Delivery,
then the Company and the Selling Stockholders shall have the right to require
each non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.

(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company and
the Selling Stockholders as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time of Delivery, or
if the Company and the Selling Stockholders shall not exercise the right
described in subsection (b) above to require non-defaulting Underwriters to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations of the
Underwriters to purchase and of the Selling Stockholders to sell the Optional
Shares) shall thereupon terminate, without liability on the part of any non-
defaulting Underwriter, the Company or the Selling Stockholders, except for the
expenses to be borne by the Company and the Selling Stockholders and the
Underwriters as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.

10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or the Selling Stockholders or any officer or
director or controlling person of the Company or the Selling Stockholders, and
shall survive delivery of and payment for the Shares.

-22-
<PAGE>

11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor Entrust Limited nor the Selling Stockholders shall then
be under any liability to any Underwriter except as provided in Sections 6 and 8
hereof; but, if for any other reason any Shares are not delivered by or on
behalf of the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders (pro rata based on the number of
Shares to be sold by the Company and such Selling Stockholders hereunder) will
reimburse the Underwriters through you for all out-of-pocket expenses approved
in writing by you, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company, Entrust Limited and
the Selling Stockholders shall then be under no further liability to any
Underwriter in respect of the Shares not so delivered except as provided in
Sections 6 and 8 hereof.

12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.

All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9/th/ Floor, New York, New York 10004, Attention: Registration
Department; and if to any Selling Stockholders shall be delivered or sent by
mail, telex or facsimile transmission to counsel for such Selling Stockholder at
its address set forth in Schedule II hereto; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention: Secretary; provided,
however, that any notice to an Underwriter pursuant to Section 8(d) hereof shall
be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.

13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company, Entrust Limited and the Selling Stockholders
and, to the extent provided in Sections 8 and 10 hereof, the officers and
directors of the Company and Selling Stockholder and each person who controls
the Company, any Selling Stockholder or any Underwriter, and their respective
heirs, executors, administrators, successors and assigns, and no other person
shall acquire or have any right under or by virtue of this Agreement. No
purchaser of any of the Shares from any Underwriter shall be deemed a successor
or assign by reason merely of such purchase.

14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.

15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.

16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.

-23-
<PAGE>

If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and each of the Selling Stockholders. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is pursuant to the authority
set forth in a form of Agreement among Underwriters (U.S. Version), the form of
which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.

Very truly yours,

Entrust Technologies Inc.

By:__________________________
Name:
Title:

ENTRUST TECHNOLOGIES LIMITED

By:__________________________
Name:
Title:

NORTHERN TELECOM LIMITED

By:__________________________
Name:
Title:

MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE MULTI-MARKET
SPECIAL INVESTMENT TRUST
FUND OF MORGAN GUARANTY
TRUST COMPANY OF NEW YORK

By: ____________________________
Name:

-24-
<PAGE>

MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE COMMINGLED
PENSION TRUST FUND
(MULTI-MARKET SPECIAL
INVESTMENT FUND II) OF
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK

By: ___________________________
Name:
Title:

MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
INVESTMENT MANAGER AND
AGENT FOR THE ALFRED P.
SLOAN FOUNDATION
(MULTI-MARKET ACCOUNT)

By:__________________________
Name:
Title:

Olympus Growth Fund II, L.P.
Olmpus Executive Fund, L.P.
Orchid & Co., nominee for T. Rowe
Price Threshold Fund III, L.P.
Societe Generale Investment Corporation

By:__________________________
Name:

As Attorney-in-Fact acting on behalf of
each of the Selling Stockholders named
in Part B of Schedule II to this Agreement.

-25-
<PAGE>

Accepted as of the date hereof:

Goldman, Sachs & Co.

Donaldson, Lufkin & Jenrette Securities Corporation

NationsBanc Montgomery Securities LLC; a subsidiary of UBS AG

Warburg Dillon Read LLC

By:
............................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters

-26-
<PAGE>

SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ---------
<S> <C> <C>
Goldman, Sachs & Co..................................
Donaldson Lufkin & Jenrette Securities Corporation...
NationsBanc Montgomery Securities LLC................
Warburg Dillon Read LLC, a subsidiary of UBS AG......
--------- -------
Total 5,653,334 848,000
</TABLE>

-27-
<PAGE>

SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED

<S> <C> <C>
The Company ............................... 4,320,000 --

The Selling Stockholder(s):

Part A:

Northern Telecom Inc.

Northern Telecom Limited

Morgan Guaranty Trust
Company of New York, as
Trustee of the Multi-Market
Special Investment Trust
Fund of Morgan Guaranty
Trust Company of New York

Morgan Guaranty Trust
Company of New York, as
Trustee of the Commingled
Pension Trust Fund
(Multi-Market Special
Investment Fund II) Of
Morgan Guaranty Trust
Company of New York

Morgan Guaranty Trust
Company of New York, As
Investment Manager and
Agent for the Alfred P.
Sloan Foundation
(Multi-Market Account)

Part B
Olympus Growth Fund II, L.P.

Olympus Executive Fund, L.P.

Orchid & Co.

Societe Generale Investment
Corporation

Total
</TABLE>

Northern Telecom Limited is represented by its general counsel; Each of Morgan
Guaranty Trust Company of New York, Olympus Growth Fund II, L.P. and Olympus
Executive Fund, L.P. are represented by Dewey Ballantine LLP; and Orchid & Co.
is represented by Testa, Hurwitz & Thibeaut, LLP. Each of the Selling
Stockholders listed under Part B above has appointed John Ryan and Michelle
Axelson, and each of them, as the Attorneys-in-Fact for such Selling
Stockholder.

-28-
<PAGE>

SCHEDULE III

JURISDICTIONS OF FOREIGN QUALIFICATIONS

-29-
<PAGE>

ANNEX I

Pursuant to Section 7(h) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:

(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;

(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial
forecasts and/or pro forma financial information) examined by them and
included in the Prospectus or the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the related published rules and regulations thereunder; and they
have made a review in accordance with standards established by the American
Institute of Certified Public Accountants of the unaudited consolidated
interim financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the periods
specified in such letter, as indicated in their reports thereon, copies of
which have been furnished to the representatives of the Underwriters (the
"Representatives") and are attached hereto;

(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as indicated in their reports thereon copies of which have been
separately furnished to the Representatives and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects with
the applicable accounting requirements of the Act and the related published
rules and regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements do
not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;

(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company
for the five most recent fiscal years included in the Prospectus agrees
with the corresponding amounts (after restatements where applicable) in the
audited consolidated financial statements for such five fiscal years which
were included in the Prospectus;

(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K and on
the basis of limited procedures specified in such letter nothing came to
their attention as a result of the foregoing procedures that caused them to
believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
<PAGE>

(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries, inspection of the
minute books of the Company and its subsidiaries since the date of the
latest audited financial statements included in the Prospectus, inquiries
of officials of the Company and its subsidiaries responsible for financial
and accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused them
to believe that:

(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus for them to be in
conformity with generally accepted accounting principles;

(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding
items in the unaudited consolidated financial statements from which
such data and items were derived, and any such unaudited data and
items were not determined on a basis substantially consistent with the
basis for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;

(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in Clause (A) and any unaudited
income statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not determined on a
basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;

(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of those statements;

(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance
shares and upon conversions of convertible securities, in each case
which were outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the consolidated long-
term debt of the Company and its subsidiaries, or any decreases in
consolidated net current assets or stockholders' equity or other items
specified by the Representatives, or any increases in any items
specified by the Representatives, in each case as compared with
amounts shown in the latest balance sheet included in the Prospectus,
except

2
<PAGE>

in each case for changes, increases or decreases which the Prospectus
discloses have occurred or may occur or which are described in such
letter; and

(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred
to in Clause (E) there were any decreases in consolidated net revenues
or operating profit or the total or per share amounts of consolidated
net income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each case
as compared with the comparable period of the preceding year and with
any other period of corresponding length specified by the
Representatives, except in each case for decreases or increases which
the Prospectus discloses have occurred or may occur or which are
described in such letter; and

(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and
(vi) above, they have carried out certain specified procedures, not
constituting an examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and financial
information specified by the Representatives, which are derived from the
general accounting records of the Company and its subsidiaries, which
appear in the Prospectus, or in Part II of, or in exhibits and schedules
to, the Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and have
found them to be in agreement.

<PAGE>

EXHIBIT 1.2

ENTRUST TECHNOLOGIES INC.
COMMON STOCK ($0.01 PAR VALUE PER SHARE)

----------------------------------------

UNDERWRITING AGREEMENT
(INTERNATIONAL VERSION)
-----------------------

, 1998
Goldman Sachs International,
Donaldson, Lufkin & Jenrette International
NationsBanc Montgomery Securities LLC
Warburg Dillon Read, a division of UBS AG
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International
Peterborough Court,
133 Fleet Street,
London EC4A 2BB, England.

Ladies and Gentlemen:

Entrust Technologies Inc., a Maryland corporation (the "Company"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate
of ........ shares of Common Stock, $0.01 par value ("Stock"), of the Company,
and the Stockholders of the Company named in Schedule II hereto (the "Selling
Stockholders") propose, subject to the terms and conditions stated herein, to
sell the Underwriters an aggregate of 1,413,333 shares and, at the election of
the Underwriters, up to an additional 212,000 shares of Stock. The aggregate of
1,413,333 shares to be sold by the Company and the Selling Stockholders is
herein called the "Firm Shares" and the aggregate of 212,000 additional shares
to be sold by the Selling Stockholders is herein called the "Optional Shares".
The Firm Shares and the Optional Shares that the Underwriters elect to purchase
pursuant to Section 2 hereof are herein collectively called the "Shares".

It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement, a copy of
which is attached hereto (the "U.S. Underwriting Agreement"), providing for the
offering by the Company and the Selling Stockholders of up to a total of
6,501,334 shares of Stock (the "U.S. Shares") including the overallotment option
thereunder through arrangements with certain underwriters in the United States
(the "U.S. Underwriters"), for whom Goldman, Sachs & Co., Donaldson, Lufkin &
Jenrette Securities Corporation, NationsBank Montgomery Securities LLC and
Warburg Dillon Read LLC, a subsidiary of UBS AG are acting as representatives.
Anything herein and therein to the contrary notwithstanding, the respective
closings under this Agreement and the U.S. Underwriting
<PAGE>

Agreement are hereby expressly made conditional on one another. The Underwriters
hereunder and the U.S. Underwriters are simultaneously entering into an
Agreement between U.S. and International Underwriting Syndicates (the "Agreement
between Syndicates") which provides, among other things, for the transfer of
shares of Stock between the two syndicates and for consultation by the Lead
Managers hereunder with Goldman, Sachs & Co. prior to exercising the rights of
the Underwriters under Section 7 hereof. Two forms of prospectus are to be used
in connection with the offering and sale of shares of Stock contemplated by the
foregoing, one relating to the Shares hereunder and the other relating to the
U.S. Shares. The latter form of prospectus will be identical to the former
except for certain substitute pages as included in the registration statement
and amendments thereto as mentioned below. Except as used in Sections 2, 3, 4, 9
and 11 herein, and except as the context may otherwise require, references
hereinafter to the Shares shall include all of the shares of Stock which may be
sold pursuant to either this Agreement or the U.S. Underwriting Agreement, and
references herein to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both of the U.S. and the
international versions thereof.

In addition, this Agreement incorporates by reference certain provisions
from the U.S. Underwriting Agreement (including the related definitions of
terms, which are also used elsewhere herein) and, for purposes of applying the
same, references (whether in these precise words or their equivalent) in the
incorporated provisions to the "Underwriters" shall be to the Underwriters
hereunder, to the "Shares" shall be to the Shares hereunder as just defined, to
"this Agreement" (meaning therein the U.S. Underwriting Agreement) shall be to
this Agreement (except where this Agreement is already referred to or as the
context may otherwise require) and to the representatives of the Underwriters or
to Goldman, Sachs & Co. shall be to the addressees of this Agreement and to
Goldman Sachs International ("GSI"), and, in general, all such provisions and
defined terms shall be applied mutatis mutandis as if the incorporated
provisions were set forth in full herein having regard to their context in this
Agreement as opposed to the U.S. Underwriting Agreement.

1. (a) The Company and Entrust Technologies Limited, a Canadian
corporation and the Company's majority-owned Subsidiary ("Entrust Limited"),
jointly and severally, hereby make with the Underwriters the same
representations, warranties and agreements as are set forth in Section 1 of the
U.S. Underwriting Agreement, which Section is incorporated herein by this
reference.

(b) Each of the Selling Stockholders severally hereby makes with the
Underwriters and the Company the same representations, warranties and agreements
as are set forth in Section 1(b) of the U.S. Underwriting Agreement, which
Section is incorporated herein by this reference.

-2-
<PAGE>

forth opposite their respective names in Schedule II hereto by a fraction, the
numerator of which is the aggregate number of Firm Shares to be purchased by
such Underwriter as set forth opposite the name of such Underwriter in Schedule
I hereto and the denominator of which is the aggregate number of Firm Shares to
be purchased by all of the Underwriters from the Company and all of the Selling
Stockholders hereunder and (b) in the event and to the extent that the
Underwriters shall exercise the election to purchase Optional Shares as provided
below, each of the Selling Stockholders agrees, severally and not jointly, to
sell to each of the Underwriters, and each of the Underwriters agrees, severally
and not jointly, to purchase from each of the Selling Stockholders, at the
purchase price per share set forth in clause (a) of this Section 2, that portion
of the number of Optional Shares as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.

The Selling Stockholders, as and to the extent indicated in Schedule II
hereto, hereby grant, severally and not jointly, to the Underwriters the right
to purchase at their election up to 212,000 Optional Shares, at the purchase
price per share set forth in the paragraph above, for the sole purpose of
covering overallotments in the sale of the Firm Shares. Any such election to
purchase Optional Shares shall be made in proportion to the maximum number of
Optional Shares to be sold by each Selling Stockholder as set forth in Schedule
II hereto. Any such election to purchase Optional Shares may be exercised only
by written notice from you to the Company and the Attorneys-in-Fact, given
within a period of 30 calendar days after the date of this Agreement and setting
forth the aggregate number of Optional Shares to be purchased and the date on
which such Optional Shares are to be delivered, as determined by you but in no
event earlier than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Company and the Attorneys-in-Fact otherwise agree in
writing, earlier than two or later than ten business days after the date of such
notice.

3. Upon the authorization by GSI of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus and in the forms of Agreement among
Underwriters (International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter hereby makes to
and with the Company the representations and agreements of such Underwriter as a
member of the selling group contained in Sections 3(d) and 3(e) of the form of
Selling Agreements.

4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as GSI may request upon at least forty-eight hours' prior notice to the
Company and the Selling Stockholders shall be delivered by or on behalf of the
Company and the Selling Stockholders to GSI, through the facilities of the
Depository Trust Company ("DTC"), for the account of such Underwriter, against
payment by or on behalf of such Underwriter of the purchase price therefor by
wire transfer of Federal (same-day) funds to the account specified by the
Company and each Selling Stockholder to Goldman, Sachs

-3-
<PAGE>

& Co. at least forty-eight hours in advance. The Company and each Selling
Stockholder will cause the certificates representing the Shares to be made
available for checking and packaging at least twenty-four hours prior to the
Time of Delivery (as defined below) with respect thereto at the office of DTC or
its designated custodian (the "Designated Office"). The time and date of such
delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New
York City time, on ............., 1998 or such other time and date as GSI, the
Company and the Selling Stockholders may agree upon in writing, and, with
respect to the Optional Shares, 9:30 a.m., New York City time, on the date
specified by GSI in the written notice given by GSI of the Underwriters'
election to purchase such Optional Shares, or such other time and date as GSI
and the Company may agree upon in writing. Such time and date for delivery of
the Firm Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares, if not the First Time of Delivery, is
herein called the "Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery".

(b) The documents to be delivered at each Time of Delivery by or on behalf
of the parties hereto pursuant to Section 7 of the U.S. Underwriting Agreement,
including the cross receipt for the Shares and any additional documents
requested by the Underwriters pursuant to Section 7(o) of the U.S. Underwriting
Agreement hereof, will be delivered at the offices of Hale and Dorr LLP, 60
State Street, Boston, Massachusetts 02109 (the "Closing Location"), and the
Shares will be delivered at the Designated Office, all at such Time of Delivery.
A meeting will be held at the Closing Location at .......p.m., New York City
time, on the New York Business Day next preceding such Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.

5. The Company and Entrust Limited jointly and severally hereby make to
the Underwriters the same agreements as are set forth in Section 5 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.

6. The Company and each of the Selling Stockholders covenant and agree
with one another and with the several Underwriters with respect to certain
expenses on the same terms as are set forth in Section 6 of the U.S.
Underwriting Agreement, which Section is incorporated herein by this reference.

7. Subject to the provisions of the Agreement between Syndicates, the
obligations of the Underwriters hereunder shall be subject, in their discretion,
at each Time of Delivery, to the condition that all representations and
warranties and other statements of the Company and the Selling Stockholders
herein are, at and as of such Time of Delivery, true and correct, the condition
that the Company and the Selling Stockholders shall have performed all of its
obligations hereunder theretofore to be performed, and additional conditions
identical to those set forth in Section 7 of the U.S. Underwriting Agreement,
which Section is incorporated herein by this reference.

8. (a) The Company, Entrust Limited and Northern Telecom Limited (the
"Indemnifying Person"), jointly and severally, will indemnify and hold harmless
each Underwriter against any

-4-
<PAGE>

losses, claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company and the Indemnifying Person shall
not be liable in any such case to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through GSI expressly for use
therein; provided, further that the liability of the Indemnifying Person
pursuant to this subsection (a) shall not exceed the product of the number of
Shares sold by such Indemnifying Person and the initial public offering price
less underwriting discount of the Shares, as set forth in the Prospectus.

(b) Each of the Selling Stockholders other than the Indemnifying Person
severally and not jointly agrees to indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission in reliance upon and conformity with written
information relating to such Selling Stockholder furnished to the Company or the
Underwriters in writing by such Selling Stockholder expressly for use therein,
and such Selling Stockholder will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the liability of a Selling Stockholder
pursuant to this subsection (b) shall not exceed the product of the number of
Shares sold by such Selling Stockholder and the initial public offering price
less the underwriting discount of the Shares, as set forth in the Prospectus.

-5-
<PAGE>

out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by such Underwriter
through GSI expressly for use therein; and will reimburse the Company and each
Selling Stockholder for any legal or other expenses reasonably incurred by the
Company or such Selling Stockholder in connection with investigating or
defending any such action or claim as such expenses are incurred.

(e) If the indemnification provided for in this Section 8 is unavailable
to or insufficient to hold harmless an indemnified party under subsection (a),
(b) or (c) above in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (d) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but

-6-
<PAGE>

also the relative fault of the Company and the Selling Stockholders on the one
hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Shares purchased under this Agreement (before deducting expenses) received by
the Company and the Selling Stockholders bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Shares purchased under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Stockholders on
the one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, each of the Selling Stockholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (e) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (e). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (e) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (e), (i) no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and (ii) no Selling
Stockholder shall be required to contribute any amount in excess of the product
of the number of Shares sold by such Selling Stockholder and the initial public
offering price less underwriting discount of the Shares as set forth in the
Prospectus. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations in this subsection (e) to contribute are several in proportion to
their respective underwriting obligations and not joint.

-7-
<PAGE>

10. The respective indemnities, agreements, representations, warranties
and other

-8-
<PAGE>

statements of the Company and the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or the Selling Stockholders or any officer or
director or controlling person of the Company or the Selling Stockholders, and
shall survive delivery of and payment for the Shares.

11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor Entrust Limited nor the Selling Stockholders shall then
be under any liability to any Underwriter except as provided in Section 6 and
Section 8 hereof, but, if for any other reason any Shares are not delivered by
or on behalf of the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders (pro rata based on the number of
Shares to be sold by the Company and such Selling Stockholders hereunder) will
reimburse the Underwriters through GSI for all out-of-pocket expenses approved
in writing by GSI, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company, Entrust Limited and
the Selling Stockholders shall then be under no further liability to any
Underwriter in respect of the Shares not so delivered except as provided in
Sections 6 and 8 hereof.

12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by GSI on behalf of you as the representatives and in
all dealings with any Selling Stockholder hereunder, you and the Company shall
be entitled to act and rely upon any statement, request, notice or agreement on
behalf of such Selling Stockholder made or given by any or all of the Attorneys-
in-Fact for such Selling Stockholder.

All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the Underwriters in care of GSI, Peterborough Court,
133 Fleet Street, London EC4A 2BB, England, Attention: Equity Capital Markets,
Telex No. 94012165, facsimile transmission No. (071) 774-1550; and if to the
Company shall be delivered or sent by registered mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: Secretary; provided, however, that any notice to an
Underwriter pursuant to Section 8(d) hereof shall be delivered or sent by mail,
telex or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire, or telex constituting such Questionnaire, which
address will be supplied to the Company by GSI upon request. Any such
statements, requests, notices or agreements shall take effect at the time of
receipt thereof.

-9-
<PAGE>

of any of the Shares from any Underwriter shall be deemed a successor or assign
by reason merely of such purchase.

14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.

15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

-10-
<PAGE>

If the foregoing is in accordance with your understanding, please sign and
return to us eight counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters, the Company
and each of the Selling Stockholders. It is understood that your acceptance of
this letter on behalf of each of the Underwriters is pursuant to the authority
set forth in a form of Agreement among Underwriters (International Version), the
form of which shall be submitted to the Company and the Selling Stockholders for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.

Very truly yours,

Entrust Technologies Inc.

By:__________________________
Name:
Title:

ENTRUST TECHNOLOGIES LIMITED

By:__________________________
Name:
Title:

NORTHERN TELECOM LIMITED

By:__________________________
Name:
Title:

-11-
<PAGE>

MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE MULTI-MARKET
SPECIAL INVESTMENT TRUST
FUND OF MORGAN GUARANTY
TRUST COMPANY OF NEW YORK

By: ____________________________
Name:

MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
TRUSTEE OF THE COMMINGLED
PENSION TRUST FUND
(MULTI-MARKET SPECIAL
INVESTMENT FUND II) OF
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK

By: ___________________________
Name:
Title:

MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, AS
INVESTMENT MANAGER AND
AGENT FOR THE ALFRED P.
SLOAN FOUNDATION
(MULTI-MARKET ACCOUNT)

By: ___________________________
Name:
Title:

Olympus Growth Fund II, L.P.
Olmpus Executive Fund, L.P.
Orchid & Co., nominee for T. Rowe
Price Threshold Fund III, L.P.
Societe Generale Investment Corporation

-12-
<PAGE>

By:__________________________
Name:

As Attorney-in-Fact acting on behalf of
each of the Selling Stockholders named
in Part B of Schedule II to this Agreement.

Accepted as of the date hereof:

Goldman Sachs International
Donaldson, Lufkin & Jenrette International
NationsBanc Montgomery Securities LLC
Warburg Dillon Read, a division of UBS AG

By: Goldman Sachs International

By:..............................
(Attorney-in-fact)

On behalf of each of the Underwriters

-13-
<PAGE>

<TABLE>
<CAPTION>
SCHEDULE I
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
-----------
<S> <C> <C>
Goldman Sachs International..................
Donaldson, Lufkin & Jenrette International...
NationsBanc Montgomery Securities LLC........
Warburg Dillon Read, a division of UBS AG....
--------- ---------
Total 1,413,333 212,000
</TABLE>

-14-
<PAGE>

SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
TOTAL NUMBER OF SHARES TO BE SOLD
FIRM SHARES IF MAXIMUM OPTION
TO BE SOLD EXERCISED
<S> <C> <C>

The Company............................. 1,080,000 --

The Selling Stockholder(s):

Part A:

Northern Telecom Inc. .......

Northern Telecom Limited.....

Morgan Guaranty Trust
Company of New York, as
Trustee of the Multi-Market
Special Investment Trust
Fund of Morgan Guaranty
Trust Company of New York....

Morgan Guaranty Trust
Company of New York, as
Trustee of the Commingled
Pension Trust Fund
(Multi-Market Special
Investment Fund II) Of
Morgan Guaranty Trust
Company of New York..........

Morgan Guaranty Trust
Company of New York, As
Investment Manager and
Agent for the Alfred P.
Sloan Foundation.............

</TABLE>
-15-
<PAGE>
SCHEDULE II (Continued)
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
TOTAL NUMBER OF SHARES TO BE SOLD
FIRM SHARES IF MAXIMUM OPTION
(Multi-Market Account) TO BE SOLD EXERCISED
Part B
<S> <C> <C>
Olympus Growth Fund II, L.P. ...........

Olympus Executive Fund, L.P. ...........

Orchid & Co. ...........................

Societe Generale Investment
Corporation ...........................

Total...................................
</TABLE>

Northern Telecom Limited is represented by its general counsel; Each of Morgan
Guaranty Trust Company of New York, Olympus Growth Fund II, L.P., Olympus
Executive Fund, L.P. and Societe Generale Investment Corporation are represented
by Dewey Ballantine LLP; and Orchid & Co. is represented by Testa, Hurwitz &
Thibeaut, LLP. Each of the Selling Stockholders listed under Part B above has
appointed John Ryan and Michele Axelson, and each of them, as the Attorneys-in-
Fact for such Selling Stockholder.

-16-

<PAGE>

Exhibit 2.3

Share Purchase Agreement

between

ENTRUST Technologies Inc., a Maryland corporation (hereinafter referred to as
"ENTRUST")

on the one part
and

Rainer A. Rueppel, Bahnhofstrasse 242, 8620 Wetzikon (hereinafter referred to
as the "SELLER"),

on the other part

(hereinafter collectively referred to as "the PARTIES")

concerning the acquisition of shares of

R/3/ Security Engineering AG
Seegraben

(the "COMPANY")
<PAGE>

-2-
Share Purchase Agreement
- --------------------------------------------------------------------------------

CONTENTS:

Definitions.................................................................. 4

1. Sale and Purchase........................................................ 7
1.1. Object of the Sale................................................. 7
1.2. Amount of Purchase Price........................................... 7
1.3. Basis Price........................................................ 7
1.4. Price Adjustment................................................... 7
1.5. Escrow............................................................. 8

2. Consideration Shares..................................................... 9
2.1. Value of Consideration Shares...................................... 9
2.2. Restrictions on Transfer........................................... 9
2.3. Right of First Refusal............................................. 10
2.4. Put Option and Make Whole Payment.................................. 11

3. Closing.................................................................. 13
3.1. Conditions Precedent............................................... 13
3.2. Completion of the sale............................................. 13
3.3. Transfer of Risks.................................................. 14

4. Representations of Seller................................................ 14
4.1. With Respect to US Securities Regulations.......................... 14
4.2. With Respect to the SHARES and the COMPANY's Capital............... 17
4.3. With Respect to the COMPANY........................................ 18
4.3.1 Existence, Good Standing, and Records................... 18
4.3.2. Accounts................................................ 18
4.3.3. Financing............................................... 19
4.3.4. Technical characteristics............................... 20
4.3.5. Intellectual property................................... 20
4.3.6. Insurances.............................................. 23
4.3.7. Customers and Suppliers................................. 23
4.3.8. Employees............................................... 24
4.3.9. Pensions and social security contributions.............. 24
4.3.10. Litigation.............................................. 24
4.3.11. Taxes................................................... 25
4.3.12. Events since Accounting Date and since end of Q1........ 25
4.3.13. Effect of the transaction............................... 26
4.3.14. Other material items.................................... 27
<PAGE>

-3-
Share Purchase Agreement
- --------------------------------------------------------------------------------

5. Warranty Claims Against Seller.......................................... 27

6. Representations of Entrust.............................................. 28
6.1. Good Standing and Authority........................................ 28
6.2. Consideration Shares............................................... 29
6.3. Capitalization..................................................... 29
6.4. Governmental Consents.............................................. 29
6.5. Warranty Claims Against Entrust.................................... 30

7. Covenants............................................................... 30
7.1. Management of the Company.......................................... 30
7.2. Product Liability.................................................. 31
7.3. Consideration Shares............................................... 31
7.4. Watermark Business................................................. 34
7.5. Offer to other Sellers............................................. 35

8. Miscellaneous........................................................... 35
8.1. Costs.............................................................. 35
8.2. Confidentiality.................................................... 35
8.3. Assignment......................................................... 36
8.4. Announcements...................................................... 36
8.5. Notices............................................................ 36
8.6. Severability....................................................... 36
8.7. Construction, amendments........................................... 37
8.8. Governing law...................................................... 37
8.9. Arbitration........................................................ 37

List of Exhibits............................................................ 38

----------------

Entrust Technologies Inc. has omitted the following schedules, which will be
provided supplementally to the Securities and Exchange Commission upon request:

- - Exhibit DIL (List of Documents Submitted to Entrust)

- - Exhibit CAP (Capital Structure of Entrust)

- - Exhibit IPR (Intellectual Property)

- - Exhibit OTH (Offer to Other Sellers)
<PAGE>

-4-
Share Purchase Agreement
- --------------------------------------------------------------------------------

Definitions

"AGREEMENT" this share purchase agreement, including the
exhibits;

"BASIS PRICE" the BASIS PRICE as defined in Sec. 1.3.;

"CLOSING" the CLOSING of this AGREEMENT pursuant
to Sec. 3;

"CO" the Swiss Code of Obligations;

"COMPANY SHARES" the common or preferred registered shares of
the COMPANY with a par value of CHF 10
each;

"COMPANY" r/3/ Security Engineering AG, Seegraben, as
defined on the first page;

"CONSIDERATION SHARES" Series A Common Stock of ENTRUST with
p.v. of USD 0.01 each;

"DEFECT" a DEFECT as defined in Sec. 5.1;

"DISTRIBUTION
COMPLIANCE PERIOD" the DISTRIBUTION COMPLIANCE PERIOD
defined in Sec. 7.3.;

"ENTRUST" ENTRUST Technologies Inc., a Maryland
corporation, as defined on the first page;

"ESCROW AGENT" Thouvenin Stutzer Eggimann & Partner,
Limmatquai 4, 8001 Zurich;

"ESCROW AGREEMENT" the escrow agreement entered into between
ENTRUST, the SELLER and the ESCROW AGENT, and
signed by the SELLER on the same date as this
AGREEMENT;

"ESCROW" the escrow established pursuant to the
ESCROW AGREEMENT and referred to in
Sec. 1.5;
<PAGE>

-5-
Share Purchase Agreement
- --------------------------------------------------------------------------------

"FIRST ANNIVERSARY" the FIRST ANNIVERSARY defined in Sec.
2.4.1.;

"GOVERNMENTAL
AUTHORITY" any government, state,
municipality or other
political subdivision
thereof and any entity
exercising executive,
legislative, judicial,
regulatory or
administrative functions of
or pertaining to government

"INTELLECTUAL PROPERTY" the INTELLECTUAL PROPERTY defined in
Sec. 4.3.5.2;

"INVISION" INVISION AG, Neuhofstrasse 4, 6341 Baar;

"IPO PUT PRICE" the IPO PUT PRICE defined in Sec. 2.4.2;

"MAKE WHOLE PAYMENT" the MAKE WHOLE PAYMENT defined in
Sec. 2.4.2;

"MARKET PRICE" the MARKET PRICE defined in Sec. 2.4.3;

"NOTICE" the NOTICE defined in Sec. 2.3.3;

"OFFERED CONSIDERATION
SHARES" the OFFERED CONSIDERATION SHARES
defined in Sec. 2.3.3;

"OFFEROR" the OFFEROR defined in Sec. 2.3.3;

"outstanding" in respect of COMPANY SHARES, the issued
COMPANY SHARES less the COMPANY
SHARES held in treasury;

"PARTY" ENTRUST and/or the SELLER, as defined on
the first page;

"PRICE ADJUSTMENT" the PRICE ADJUSTMENT, as defined in
Sec. 1.4.;
<PAGE>

-6-
Share Purchase Agreement
- --------------------------------------------------------------------------------

"PRINCIPAL MARKET" the PRINCIPAL MARKET defined in Sec.
2.4.3;

"PUBLIC OFFERING" the PUBLIC OFFERING defined in Sec. 2.3.6;

"PURCHASE PRICE" the total consideration paid by ENTRUST for
the SHARES, as defined in Sec. 1.2.;

"PUT RIGHT" the PUT RIGHT defined in Sec. 2.4.1;

"PUT SHARES" the PUT SHARES defined in Sec. 2.4.1;

"REGULATION S" the REGULATION S defined in Sec. 4.1.1.;

"SECURITIES ACT" the U.S. Securities Act of 1933, as amended;

"SELLER" Rainer A. Rueppel, Bahnhofstrasse 242, 8620
Wetzikon, as defined on the first page;

"SHARES" the COMPANY SHARES sold by the SELLER
pursuant to Sec. 1.1.;

"SIGNING" the SIGNING of this AGREEMENT;

"STANDARD PUT PRICE" the STANDARD PUT PRICE defined in
Sec. 2.4.1;

"WATERMARK COMPANY" the WATERMARK COMPANY defined in
Sec. 7.4.;
<PAGE>

-7-
Share Purchase Agreement
- --------------------------------------------------------------------------------

1. Sale and Purchase

1.1. Object of the Sale

ENTRUST purchases from the SELLER, and the SELLER sells to ENTRUST 24,000
COMPANY SHARES ("the SHARES") pursuant to the terms and conditions of this
AGREEMENT.

1.2. Amount of Purchase Price

The PURCHASE PRICE shall be composed of (i) the BASIS PRICE and, if any, the
PRICE ADJUSTMENT, provided, however, that such PRICE ADJUSTMENT shall be due
only if, within 90 days after CLOSING, ENTRUST obtains directly or through the
COMPANY 100% of the COMPANY SHARES. The right of the SELLER to the PRICE
ADJUSTMENT expires at midnight on the 90th day after CLOSING.

1.3. Basis Price

1.3.1. The BASIS PRICE shall be paid to the Seller at CLOSING in (i) USD
1,725,024 -- and (ii) 180,821 CONSIDERATION SHARES, valued at USD 58.30 each
pursuant to Sec. 2.1.1.

1.3.2. Notwithstanding the previous Sec. 1.3.1., 22,369 out of the 180,821
CONSIDERATION SHARES shall be placed into ESCROW pursuant to Sec 1.5. 506
CONSIDERATION SHARES out of the 180,821 CONSIDERATION SHARES (being the
CONSIDERATION SHARES to be placed into escrow by Markus Kroll) shall furthermore
be placed into a separate escrow, pursuant to terms and conditions still to be
negotiated, but substantially in accordance with the principles applying to the
CONSIDERATION SHARES held in ESCROW pursuant to Sec. 1.5.2.(b).

1.4. Price Adjustment

1.4.1. The PRICE ADJUSTMENT, if any, shall be composed of 12,884 CONSIDERATION
SHARES.

-8-
Share Purchase Agreement
- --------------------------------------------------------------------------------

ADJUSTMENT shall be paid to the SELLER in accordance with the SELLER's
instructions. If the conditions for the payment of the PRICE ADJUSTMENT are
already fulfilled at CLOSING, the payment of the PRICE ADJUSTMENT shall take
place at the later (i) of CLOSING or (ii) five business days following the
receipt by ENTRUST of the share purchase AGREEMENTS for all outstanding COMPANY
SHARES.

1.5. Escrow

1.5.1. The 22,369 CONSIDERATION SHARES held in ESCROW pursuant to Section 1.3.1.
shall be delivered to, kept and/or released by the ESCROW AGENT pursuant to the
ESCROW AGREEMENT. The CONSIDERATION SHARES and any cash proceeds from the sale
of such CONSIDERATION SHARES whilst held in ESCROW pursuant to Sec. 1.5.4 hereof
shall be deposited by the ESCROW AGENT in a Swiss bank of international standing
and reputation.

1.5.2. [Intentionally omitted pursuant to waiver letter of ENTRUST]

(a) [Intentionally omitted pursuant to waiver letter of ENTRUST]

(b) during a period of 24 months after CLOSING, the number of CONSIDERATION
SHARES held in escrow shall not be reduced to less than 22,369
CONSIDERATION SHARES, or to such amount as adjusted to account for a MAKE
WHOLE PAYMENT pursuant to Sec. 2.4.2 hereof.

1.5.3. The CONSIDERATION SHARES held in escrow pursuant to Sec. 1.5.2(b) shall
be kept for a period of 24 months following CLOSING as a security for claims of
ENTRUST in connection with claims based on the representations and warranties of
Sec. 4 and 5 and on the covenants of Sec. 7.1.1 and 7.1.2.
<PAGE>

-9-
Share Purchase Agreement
- --------------------------------------------------------------------------------

1.5.4. CONSIDERATION SHARES held in ESCROW may not be sold. Notwithstanding the
previous sentence, CONSIDERATION SHARES held in ESCROW only on the basis of Sec.
1.5.2(b) can be sold, provided, however, that during the 24-months period
following CLOSING, or thereafter if the duration of the ESCROW is extended in
connection with any warranty claim of ENTRUST, the transfer of such
CONSIDERATION SHARES to the acquirer shall be valid and shall take place only if
the cash consideration to be received by the SELLER is placed into escrow in
lieu of the CONSIDERATION SHARES.

1.5.5. Variations in the price of the CONSIDERATION SHARES shall not cause any
variation in the number of CONSIDERATION SHARES to be put in ESCROW.

1.5.6. The specific terms and conditions of the ESCROW AGREEMENT are reserved.

2. Consideration Shares

2.1. Value of Consideration Shares

2.1.1. For the purpose of the conversion of any amount expressed in USD into a
certain number of CONSIDERATION SHARES or vice-versa, each CONSIDERATION SHARE
shall be deemed to be worth USD 58.30 (or, after CLOSING, such other amount as
adjusted for stock splits, stock dividends and other recapitalizations taking
place after CLOSING). Fractions of CONSIDERATION SHARES shall be rounded to the
nearest whole number, and the difference paid or deducted from amounts otherwise
payable in cash, as the case may be.

2.1.2. If ENTRUST calls upon the ESCROW as a security in connection with a
DEFECT, the actual market value of the CONSIDERATION SHARES, and not the value
set pursuant to the previous Sec. 2.1.1. shall determine the number of
CONSIDERATION SHARES to be attributed to ENTRUST.

2.2. Restrictions on Transfer

2.2.1. The CONSIDERATION SHARES are restricted securities. They are the object
of the representations and warranties of Sec. 4.2 and of the covenants of Sec.
6.3.
<PAGE>

-10-
Share Purchase Agreement
- --------------------------------------------------------------------------------

2.2.2. Notwithstanding the SELLER's ability to resell CONSIDERATION SHARES under
United States or other securities laws, any sale or other disposition of any of
the CONSIDERATION SHARES by the SELLER, other than according to the provisions
of Sections 2.2.3, 2.3 or 2.4 below, shall be void and transfer no right, title,
or interest in or to any of such CONSIDERATION SHARES to the purported
transferee.

2.2.3. The SELLER may sell, assign or transfer CONSIDERATION SHARES to his
spouse or children or to a trust established for the benefit of his spouse,
children or himself, or dispose of them under his will, without compliance with
Section 2.3, provided, however, that such transferee will be subject to the same
contractual transfer restrictions as the SELLER.

2.3. Right of First Refusal

2.3.1. If the SELLER desires to sell, transfer or otherwise dispose of any of
his CONSIDERATION SHARES, or of any interest in such CONSIDERATION SHARES,
whether voluntarily or by operation of law, in any transaction other than
pursuant to Section 2.2.3. or 2.4 of this Agreement, the SELLER shall first
deliver written notice of his desire to do so (the "NOTICE") to ENTRUST in the
manner prescribed in Section 8.5 of this Agreement. The NOTICE must specify: (i)
the name and address of the party to which the SELLER proposes to sell or
otherwise dispose of the CONSIDERATION SHARES or an interest in the
CONSIDERATION SHARES (the "OFFEROR"), (ii) the number of CONSIDERATION SHARES
the SELLER proposes to sell or otherwise dispose of (the "OFFERED CONSIDERATION
SHARES"), (iii) the consideration per SHARE to be delivered to the SELLER for
the proposed sale, transfer or disposition, and (iv) all other material terms
and conditions of the proposed transaction.

2.3.2. ENTRUST shall have the first option to purchase all but not less than all
of the OFFERED CONSIDERATION SHARES for the consideration per SHARE and on the
terms and conditions specified in the NOTICE. ENTRUST must exercise such option,
no later than 15 days after such NOTICE is deemed to have been delivered to it
under Section 8.5, by written NOTICE to the SELLER, provided, however, that such
deadline will be extended to 30 days if the number of OFFERED CONSIDERATION
SHARES exceeds 50,000.

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PARTIES five (Swiss) business days after the expiration of deadline for the
exercise of the right of first refusal pursuant to Section 2.3.2. above. If
ENTRUST does not exercise its option to purchase the CONSIDERATION SHARES, the
closing of the sale must take place in accordance with the terms and conditions
specified in the NOTICE no later than 60 days after the expiration of the option
of ENTRUST.

2.3.4. To the extent that the consideration proposed to be paid by the OFFEROR
for the OFFERED CONSIDERATION SHARES consists of property other than cash or a
promissory note, the consideration required to be paid by ENTRUST may consist of
cash equal to the value of such property, as determined in good faith by
agreement of the SELLER and ENTRUST.

2.3.6 The right of first refusal of ENTRUST set forth in this Section 2.3 shall
terminate upon the closing of ENTRUST's initial public offering of Series A
Common Stock pursuant to an effective registration statement under the
SECURITIES ACT (a "PUBLIC OFFERING").

2.4. Put Option and Make Whole Payment

2.4.1. If ENTRUST's Series A Common Stock is not listed on a United States
national securities exchange, the Nasdaq Stock Market or another U.S. nationally
recognized exchange or trading system on the first anniversary of CLOSING (the
"FIRST ANNIVERSARY"), and the SELLER is the beneficial owner of CONSIDERATION
SHARES as of the FIRST ANNIVERSARY, then the SELLER shall have 15 days to give
written notice to ENTRUST of its intention, if any, to sell to ENTRUST (the "PUT
RIGHT"), all, but not less than all, of the CONSIDERATION SHARES owned by the
SELLER (including any CONSIDERATION SHARES to be released from escrow on the
FIRST ANNIVERSARY but excluding any CONSIDERATION SHARES remaining in escrow
after the FIRST ANNIVERSARY) (the "PUT SHARES"). If the SELLER exercises its PUT
RIGHT, the SELLER agrees to sell the PUT SHARES to ENTRUST, and ENTRUST agrees
to purchase the PUT SHARES from the SELLER, at a price of USD $58.30 (subject to
adjustment for stock dividends, stock splits and other recapitalizations) (the
"STANDARD PUT PRICE"). The PUT RIGHT is subject to the following:

(a) [Intentionally omitted pursuant to waiver letter of ENTRUST]

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(b) the payment of the STANDARD PUT PRICE against the delivery of the PUT
SHARES shall be made in three equal quarterly installments beginning within
5 (Swiss) business days after ENTRUST has received notice of exercise of
the PUT RIGHT.

2.4.2. If ENTRUST's Series A Common Stock is listed on a United States national
securities exchange, the Nasdaq Stock Market or another U.S. nationally
recognized exchange or trading system prior to the FIRST ANNIVERSARY, and the
MARKET PRICE is less than USD $48.30 (subject to adjustment for stock dividends,
stock splits and other recapitalizations) (the "IPO PUT PRICE"), then ENTRUST
shall make an additional payment per CONSIDERATION SHARE, in cash or in shares
of its Series A Common Stock (the choice of either form being at the sole
discretion of ENTRUST), to the SELLER equal to the difference between the IPO
PUT PRICE and the MARKET PRICE (the "MAKE WHOLE PAYMENT"), subject to the
following provisions:

(a) [Intentionally omitted pursuant to waiver letter of ENTRUST]

(b) ENTRUST agrees to deliver the MAKE WHOLE PAYMENT pursuant to the
instructions of the SELLER within 10 Swiss business days after the end of
the relevant period for the determination of the MARKET PRICE pursuant to
Sec. 2.4.3 hereinafter.

(c) Notwhithstanding the previous paragraph and Sec. 1.5.5, any MAKE WHOLE
PAYMENT made in connection with any CONSIDERATION SHARES held in escrow
pursuant to Sec. 1.5 shall be placed by ENTRUST into ESCROW and shall be
held and released like the CONSIDERATION SHARES it relates to.

2.4.3. MARKET PRICE means the average of the closing sale price of ENTRUST's
Series A Common Stock on the principal United States securities exchange or
trading market for such stock (the "PRINCIPAL MARKET") for the ten (10) trading
days beginning on the first day of trading of such stock on the PRINCIPAL
MARKET.
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3. Closing

3.1. Conditions Precedent

CLOSING is subject to the following conditions precedent:

(a) the approval of the AGREEMENT by the board of directors of the COMPANY;

(b) the approval of the AGREEMENT by the stockholders and the board of
directors of ENTRUST;

(d) the Watermark intellectual property has been transferred to the WATERMARK
COMPANY pursuant to Sec. 7.4. prior to CLOSING.

3.2. Completion of the sale

3.2.1. The sale and purchase of the SHARES will be completed at the offices of
Bar & Karrer, Seefeldstrasse 19, 8008 Zurich, at the latest on 8 June 1998
("CLOSING").

3.2.2. At CLOSING, the SELLER shall produce and deliver to ENTRUST:

(a) share certificates endorsed to ENTRUST representing the SHARES;

(b) share certificates endorsed to the COMPANY representing the COMPANY SHARES
held in treasury by the COMPANY as of CLOSING;

(d) the original share register of the Company (Art. 686 CO), duly signed by
the board of directors, and bearing ENTRUST as shareholder for the SHARES,
without any restriction or limitation; and

(e) the resignation letter of Dr. Markus Kroll and of Mr. Peter Titz.

3.2.3. At CLOSING, ENTRUST shall, on its part, deliver to the SELLER:
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(a) a certificate of the Secretary evidencing the decision of the BOARD of
ENTRUST approving this AGREEMENT;

(b) an original and irrevocable promise by a bank of international standing and
reputation to pay the BASIS PRICE, and, if due at CLOSING, the PRICE
ADJUSTMENT or, at the election of ENTRUST, a bank check drawn on a bank of
international standing and reputation and issued for the same amount;

(d) a receipt issued by the ESCROW AGENT as proof that the CONSIDERATION SHARES
to be delivered to the ESCROW AGENT at CLOSING pursuant to Sec. 1.5.1 have
been placed into ESCROW.

3.3. Transfer of Risks

The risks and profits relating to the SHARES and to the COMPANY shall pass to
ENTRUST at CLOSING.

4. Representations of Seller

Subject to the disclosure made in the Disclosure Letter (Exhibit DIL) and to the
provisions of Sec. 5 below, the SELLER makes the following representations,
which truly and accurately reflect the factual and legal situation as of the
date of this AGREEMENT.

4.1. With Respect to US Securities Regulations

4.1.1. With respect to the CONSIDERATION SHARES issued to and acquired by the
SELLER hereunder, the SELLER represents and warrants as follows:

(a) The SELLER will be acquiring the CONSIDERATION SHARES for his own account
for investment only, and not with a view to, or for sale in connection
with, any distribution of such CONSIDERATION SHARES in violation of the
SECURITIES ACT or any rule or regulation under the SECURITIES ACT.

(b) The SELLER has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the acquisition of the
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CONSIDERATION SHARES and to make an informed investment decision with respect to
such investment.

(d) The SELLER understands and acknowledges that (i) the CONSIDERATION SHARES,
if and when issued, will be "restricted securities" under Rule 144 of the
SECURITIES ACT and may not be offered or sold in the United States or to,
or for the account or benefit of, any U.S. person unless such securities
are registered under the SECURITIES ACT or such offer or sale is made
pursuant to an exemption from the registration requirements of the
SECURITIES ACT, (ii) the CONSIDERATION SHARES are being distributed by
ENTRUST pursuant to the terms of REGULATION S, which permits securities to
be sold to non-U.S. persons in "offshore transactions" (as defined in
REGULATION S), subject to certain terms and conditions, and (iii) hedging
transactions involving the CONSIDERATION SHARES may not be conducted unless
in compliance with the SECURITIES ACT.

(e) The SELLER has signed this AGREEMENT outside the United States.

4.1.2. The following are definitions contained in REGULATION S as in effect on
the date of this Agreement:

(a) "U.S. person" means:

(i) Any natural person resident in the United States;

(ii) Any partnership or corporation organized or incorporated under the
laws of the United States;

(iii) Any estate of which any executor or administrator is a U.S. person;

(iv) Any trust of which any trustee is a U.S. person;

(v) Any agency or branch of a foreign entity located in the United
States;

(vi) Any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit
or account of a U.S. person;
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(vii) Any discretionary account or similar account (other than an estate
or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States;
and

(viii) Any partnership or corporation if:

- Organized or incorporated under the laws of any foreign
jurisdiction; and

- Formed by a U.S. person principally for the purpose of investing in
securities not registered under the SECURITIES ACT, unless it is
organized or incorporated, and owned, by accredited investors (as
defined in Rule 501(a) of the SECURITIES ACT) who are not natural
persons, estates or trusts.

(b) The following are not "U.S. persons":

(i) Any discretionary account or similar account (other than an estate or
trust) held for the benefit or account of a non-U.S. person by a
dealer or other professional fiduciary organized, incorporated, or
(if an individual) resident in the United States;

(ii) Any estate of which any professional fiduciary acting as executor or
administrator is a U.S. person if:

An executor or administrator of the estate who is not a U.S. person has
sole or shared investment discretion with respect to the assets of
the estate; and

The estate is governed by foreign law;

(iii) Any trust of which any professional fiduciary acting as trustee is a
U.S. person, if a trustee who is not a U.S. person has sole or shared
investment discretion with respect to the trust assets, and no
beneficiary of the trust (and no settlor if the trust is revocable)
is a U.S. person;

(iv) An employee benefit plan established and administered in accordance
with the law of a country other than the United States and customary
practices and documentation of such country;

(v) Any agency or branch of a U.S. person located outside the United
States if:

- The agency or branch operates for valid business reasons; and
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- The agency or branch is engaged in the business of insurance or
banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located; and

(vi) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank,
the Asian Development Bank, the African Development Bank, the United
Nations, and their agencies, affiliates and pension plans, and any
other similar international organizations, their agencies, affiliates
and pension plans.

(c) "United States" means the United States of America, its territories and
possessions, any State of the United States, and the District of Columbia.

4.2. With Respect to the SHARES and the COMPANY's Capital

4.2.1. The SHARES have been duly issued and are fully paid in. They are free of
any pledge, charge, encumbrances, or restrictions of any kind or nature.

4.2.2. The SELLER has good and valid title to the SHARES and he may freely
dispose of such SHARES without any limitation or restriction of any kind or
nature.

4.2.3. The COMPANY has a an issued share capital of CHF 400,000.-- composed of
40,000.--fully paid in registered shares with a nominal value of CHF 10.--
each. 8,000 of said registered shares are preferred shares. In addition to the
issued share capital, the COMPANY has a conditional capital of CHF 50,000.-- for
5,000 registered shares with a par value of CHF 10.-- each. The COMPANY has no
other issued, authorized or conditional equity.

4.2.4. There are no subscription rights, options, warrants, offers or other
commitments outstanding, which would oblige the COMPANY to issue any new COMPANY
SHARES or to transfer such COMPANY SHARES. Any such rights, options or offers
disclosed to ENTRUST in the due diligence have extinguished without affecting
the representation made under Sec. 4.2.3 above.

4.2.5. No prior issue, payment, contribution, sale, redemption, or transfer in
respect of the SHARES, has given or may give rise to any right, claim or action
against the COMPANY or ENTRUST.

4.2.6. The SELLER has granted 500 options to Peter Titz and 1,200 options to
Markus Kroll in relation to his SHARES. SELLER represents and warrants that,
despite of these
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options, he is entitled to sell all his SHARES to ENTRUST, provided that the
following CONSIDERATION SHARES (forming part of the SELLERS' PURCHASE PRICE) are
delivered to the SELLER at CLOSING: (i) 2015 CONSIDERATION SHARES registered in
the name of Peter Titz, and (ii) 4,837 CONSIDERATION SHARES registered in the
name of Markus Kroll, of which 506 shall be put into escrow pursuant to Sec.
1.3.2.

4.3. With Respect to the COMPANY

4.3.1. Existence, Good Standing, and Records

4.3.1.1. The excerpt from the Commercial Register and the articles of
association in Exhibit DIL are current, true, and complete.

4.3.1.2. The minutes of the shareholders' and of the board of directors'
meetings listed in Exhibit DIL contain a complete, true and accurate record of
all such meetings over the period mentioned therein.

4.3.1.3. To the extent that the COMPANY carries business outside of Switzerland,
it is presently in good standing and having the necessary licences and permits
to carry on its business in these jurisdictions.

4.3.1.4. The COMPANY has no subsidiary, and has no participation in any other
entity, except for its participation in Swiss Security Service Laboratory AG,
Solothurn.

4.3.2. Accounts

4.3.2.1. The accounts attached in Exhibit DIL, including the first quarter
results submitted to ENTRUST, comply with the requirement of the Swiss Code of
Obligations, and have been prepared in accordance with accounting principles and
practices generally accepted in Switzerland.

4.3.2.2. Subject to the applicable accounting principles, the audited accounts
as of 31 December 1997 (the "Accounts"), as well as the first quarter results,
as per the date they were established:

(a) set forth without overestimation the capital, reserves, assets, and profits
of the COMPANY;

(b) fully provide for all bad or doubtful claims and receivables;
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(d) are not affected (except as disclosed in the Accounts) by any extraordinary
or exceptional event, circumstance or item.

4.3.2.3. The accounts of the COMPANY for each financial year since its creation
have been consistently approved, without any qualification or restriction of any
kind, by the statutory auditors of the COMPANY.

4.3.2.4. The accounting records of the COMPANY are up to date and contain
complete and accurate details of all transactions of the COMPANY in compliance
with Art. 662 et seq. and 957 et seq. CO.

4.3.2.5. The COMPANY's records' systems and information, and the means of access
to them, are under the COMPANY's direct control.

4.3.2.6. There was no distribution of, nor any decision or committment to
distribute any dividend in whatever form for the financial year ending on 31
December 1997. The spin-off of the WATERMARK BUSINESS pursuant to Sec. 7.4. is
reserved.

4.3.2.7. ENTRUST is aware that the first quarter results do not contain the
accrued bonus payments for the first quarter of 1998, since the bonus payment,
if any, shall be decided at the end of the year. Said bonus payments are to be
made pursuant to the provisions of the employment agreements disclosed to
ENTRUST.

4.3.2.8. The issue prospectus dated 22 May 1998, including the financial
statements contained therein, constitutes full, true and plain disclosure of all
material facts relating to the COMPANY as of such date. The issue prospectus
contains no untrue statement of material facts, and the financial figures
contained in the issue prospectus are based on the same principle as those
applied for the establishement of the Accounts, as represented above in this
Sec. 4.3.2.

4.3.3. Financing

4.3.3.1. The COMPANY has not made nor entered into any contract to make any
loan to any person or other arrangement whereby it is or may be owed any money
other than trade debts incurred in the ordinary course of business.

4.3.3.2. The COMPANY is not entitled to the benefit of any debt otherwise than
as the original creditor and has not factored or discounted any debt or agreed
to do so.
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4.3.3.3. All of the accounts receivable which are reflected in the Accounts as
owed to the COMPANY (apart from bad and doubtful debts to the extent to which
they have been provided for in the Accounts) or which have subsequently been
recorded in the books of COMPANY have realised or are reasonably expected to
realise in the normal course of collection and within three months of CLOSING
their full value as included in the Accounts, after deduction of any provision
for bad debts.

4.3.3.4. ENTRUST is aware that some employees may have an overdraft with the
COMPANY, such overdraft being in aggregate of no more than CHF 50,000.--.

4.3.4. Technical characteristics

4.3.4.1. The quality of the COMPANY'S source code base in terms of security
design, documentation, performance, stability and reliability including year
2000 compliance is sufficient to carry on the business of the COMPANY as
currently contemplated, subject, however, to (i) the ongoing improvements and
developments made in the ordinary course of the COMPANY's business, and (ii)
unforseen external market and technology developments.

4.3.5. Intellectual property

4.3.5.1. The COMPANY owns, or is licensed or otherwise possesses a right to use,
all INTELLECTUAL PROPERTY (as defined below) used in the operation of its
business or necessary for the operation of its business as currently conducted,
except as otherwise disclosed in Exhibit IPR. The COMPANY has taken reasonable
measures to protect the proprietary nature of trade secrets and confidential
information (as defined below) that it owns or uses. Except as disclosed in
Exhibit IPR, the Company has not granted any rights to any of the INTELLECTUAL
PROPERTY owned by the COMPANY (other than any rights in any INTELLECTUAL
PROPERTY not owned by the COMPANY that constitutes commercially available
software generally available to the public) to any person or business entity. To
the SELLER's knowledge, no other person or business entity is infringing,
violating or misappropriating any of the INTELLECTUAL PROPERTY that the COMPANY
owns. The COMPANY has acquired all rights to INTELLECTUAL PROPERTY developed or
held by any employees (within the scope and term of his employment or otherwise
relating to the current or proposed business of the COMPANY) or third parties
who developed INTELLECTUAL PROPERTY for the COMPANY and no outstanding claims
for the payment of any purchase price or indemnity in respect of such
INTELLECTUAL PROPERTY is threatened or outstanding, except as disclosed in
Exhibit IPR.
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4.3.5.2. For purposes of this Agreement, "INTELLECTUAL PROPERTY" means all (A)
patents, patent applications, patent disclosures and all related continuation,
continuation in part, divisional, reissue, reexamination, utility model,
certificate of invention and design patents, patent applications, registrations
and applications for registrations; (B) trademarks, service marks, trade dress,
logos, trade names and corporate names and registrations and applications for
registration thereof; (C) copyrights and registrations and applications for
registration thereof; (D) computer software, data and documentation; (E) trade
secrets and confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, know-how, manufacturing and
production processes and techniques, research and development information,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information; (F) other proprietary rights relating to any of the foregoing and
(G) copies and tangible embodiments thereof.

4.3.5.3. None of the activities or business conducted by the COMPANY infringes,
violates or constitutes a misappropriation of (or in the past infringed,
violated or constituted a misappropriation of) any INTELLECTUAL PROPERTY rights
of any other person or business entity, except as disclosed in Exhibit IPR. The
COMPANY has not received any complaint, claim or notice alleging any such
infringement, violation or misappropriation, and, to SELLER's knowledge, there
is no basis for any such complaint, claim or notice.

4.3.5.4. Exhibit IPR identifies each (a) patent or registration that has been
issued to the COMPANY with respect to any of its INTELLECTUAL PROPERTY, (b)
pending patent application or application for registration that the COMPANY has
made with respect to any of its INTELLECTUAL PROPERTY and (c) license or other
agreement pursuant to which the COMPANY has granted any rights to any third
party with respect to any of its INTELLECTUAL PROPERTY. The COMPANY has
delivered to ENTRUST or its advisors correct and complete copies of all such
patents, registrations, applications, licenses and agreements (as amended to
date) and has specifically identified and made available to ENTRUST or its
advisors correct and complete copies of all other written documentation
evidencing ownership of, and any claims or disputes relating to, each such item.
With respect to each item of INTELLECTUAL PROPERTY that the COMPANY owns, except
as provided in Exhibit IPR:

(a) the COMPANY possesses all right, title and interest in and to such item;

(b) such item is not subject to any outstanding judgment, order, decree,
stipulation or injunction; and
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(c) the COMPANY has not agreed to indemnify any person or business entity for
or against any infringement, misappropriation or other conflict with
respect to such item.

4.3.5.5. The COMPANY has supplied ENTRUST or its advisors with correct and
complete copies of all licenses, sublicenses or other agreements (as amended to
date) pursuant to which the COMPANY uses such INTELLECTUAL PROPERTY, all of
which are annexed in Exhibit IPR. To the SELLER's knowledge and with respect to
each such item of INTELLECTUAL PROPERTY, except as otherwise disclosed in
Exhibit IPR:

(a) the license, sublicense or other agreement covering such item is legal,
valid, binding, enforceable and in full force and effect with respect to
the COMPANY, and is legal, valid, binding, enforceable and in full force
and effect with respect to each other party thereto;

(b) neither the COMPANY nor any other party to such license, sublicense or
other agreement is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default by the
COMPANY or by any such other party, or permit termination, modification or
acceleration thereunder;

(c) the underlying item of INTELLECTUAL PROPERTY is not subject to any
outstanding judgment, order, decree, stipulation or injunction to which the
COMPANY is a party or has been specifically named, nor subject to any other
outstanding judgment, order, decree, stipulation or injunction;

4.3.5.6. With respect to each such item of INTELLECTUAL PROPERTY except as
otherwise disclosed in Exhibit IPR:

(a) the COMPANY has not agreed to indemnify any person or business entity for
or against any interference, infringement, misappropriation or other
conflict with respect to such item; and

(b) no license or other fee is payable upon any transfer or assignment of such
license, sublicense or other agreement by the terms thereof or the terms of
any other agreement or arrangement with the other party or parties thereto.

4.3.5.7. The SELLER warrants to the best of its knowledge that the COMPANY has
taken and plans to take up to the year 2000 all reasonable measures up to then
known as state of the art to ensure that its software products are designed to
perform, and will perform correctly at all times prior to, during and after the
calendar year 2000, all functions, calculations, sequencing, displays and other
processing of calendar dates and date-related data without error or degradations
in performance, specifically including
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any error relating to, or the product of, date data which represent different
centuries or more than one century.

4.3.6. Insurances

4.3.6.1. Exhibit DIL lists all private insurance contracts concluded by the
COMPANY.

4.3.6.2. All premiums due in relation to the COMPANY's insurances have been
paid, and nothing has been done or omitted to be done which would make any
policy of insurance of the COMPANY void or voidable or which is likely to result
in an increase in premium or which would release any insurer from any of its
obligations under any policy of insurance of the COMPANY.

4.3.6.3. There is no insurance claim pending or outstanding and there are no
circumstances likely to give rise to any such claim.

4.3.7. Customers and Suppliers

4.3.7.1. To the SELLER's best knowledge, none of the current COMPANY's
customers or suppliers intends or has threatened to cease or alter their
business with the COMPANY. The SELLER is not aware of the existence of any
formal change of control clause in any material contract with any customer or
supplier of the COMPANY, other than as might be contained in the contracts
listed in Exhibit DIL and provided to ENTRUST. The SELLER has not made and is
not expected to make any investigations as to the intents of the COMPANY's
suppliers and customers.

4.3.7.2. Neither the COMPANY nor the SELLER has made extraordinary promises,
commitments or assurances, whether oral or written, express or implied, to the
effect that the COMPANY will or may:

(a) offer future price reductions, concessions or other special terms to any
customer of the COMPANY;

(b) accept future price increases or additional charges or other special terms
to any supplier of the COMPANY; or

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4.3.7.3. There is no assumed contract which the SELLER can reasonably forsee
that will result in any material loss upon performance thereof by the COMPANY
after CLOSING.

4.3.8. Employees

4.3.8.1. Exhibit DIL accurately lists the name, position, and current annual
compensation of each employee of the COMPANY. The employment agreements with the
key-employees enclosed in Exhibit DIL are true and correct and fully in force.

4.3.8.2. None of the key-employees has notified the COMPANY of its intent to
terminate employment or is expected to terminate employment. With the exception
of military service and regular vacations, no such key-employee is absent from
work on disability or other leave or has notified the COMPANY of intent to take
any such leave. ENTRUST is aware of a possible termination of the contract with
Mr. Herrigel as well as of the absence of Mr Wildhaber for education purposes
(for an aggregate amount of about 15 days).

4.3.8.3. All salaries, bonuses or other compensation of any kind and nature
have been timely paid to the COMPANY's employees.

4.3.9. Pensions and social security contributions

4.3.9.1. The COMPANY has paid all contributions it is required to make by law
or by agreement with its employees, with any labour organization, or with any
insurance company with respect to pensions and social security, and especially
all contributions to the AHV / IV, ALV and SUVA.

4.3.9.2. The COMPANY complies with all legal obligations with respect to its
employees' pensions and social security.

4.3.10. Litigation

4.3.10.1. To the knowledge of the SELLER, there are no suits, arbitrations,
administrative or other proceedings (including debt collection proceeding or
other insolvency proceedings) in any matter subject to private or to public law,
pending, threatened against or otherwise affecting the COMPANY.

4.3.10.2. The COMPANY is not subject to any judgement, order or decree which has
affected or may affect its business.
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4.3.11. Taxes

4.3.11.1. The COMPANY has filed all tax returns and withheld and paid or
discharged all taxes, assessments and penalties due and payable , and there is
no further liability for any such taxes and no interests or penalties accrued or
accruing with respect thereto.

4.3.11.2. All tax returns of the COMPANY are accurate and complete. To the
SELLER's best knowledge, no audit of any tax return of the COMPANY is pending or
proposed. There is no fact, circumstance, organizational structure, act or event
which could give rise to any claim of tax underpayments, penalties, or
disqualifications of any tax status of the COMPANY for prior years, which have
not been discharged of or provisioned for.

4.3.11.3. For the tax period ending on 31 December 1997, the tax returns can be
filed on the basis of the accounts for the business year 1997 as attached in
Exhibit DIL. There are no outstanding agreements or waivers extending any period
of limitation applicable to any tax return of the COMPANY. Notwithstanding the
previous sentence, the COMPANY has received an extension of the filing of the
tax return for 1997, since the COMPANY has just received the audit report in
relation to the 1997 figures.

4.3.11.4. There are no disputes as to taxes nor any tax liens, whether existing
or threatened, on any assets as well as on any income or expense item of the
profit and loss statement of the COMPANY.

4.3.11.5. The words "tax" and "taxes" in this AGREEMENT mean all taxes, however
denominated, including interest, penalties, and other additions to taxes that
may become payable in respect thereof, imposed by the state, the cantons, the
municipalities or by any other agency or political subdivision, such as income
taxes and capital taxes due on the basis of taxable profit and taxable capital
as declared in the tax returns, or other taxes (for example VAT) due on the
basis of a filed tax return, as well as all other taxes, including but not
limited to taxes due on the basis of an adjustment of figures as declared in tax
returns filed with the tax authorities or due on the basis of an adjustment of a
provisional or final assessment from whatever authority and for whatever reason.

4.3.12. Events since Accounting Date and since end of Q1

4.3.12.1. Since 31 December 1997, respectively since 31 March 1998:
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(a) the business of the COMPANY has been carried on in the ordinary and normal
course;

(b) there has been no material adverse change in the financial or market
position of the COMPANY, including any such change in respect of turnover,
profits, margins of profitability, liabilities (actual or contingent) or
expenses of the COMPANY; and

(c) there has been no substantial and abnormal change in the basis or terms on
which clients or suppliers are prepared to do business with the COMPANY.

4.3.12.2. The spin-off of the Watermark business pursuant to Sec. 7.4 is
excluded from the representations made in this Sec. 4.3.12.

4.3.13. Effect of the transaction

4.3.13.1. To the SELLERS' best knowledge the customers and suppliers of the
COMPANY have not been informed that the control over the COMPANY may be sold to
ENTRUST. The SELLER is not aware of any formal notification that the execution
or CLOSING of this AGREEMENT and of the change of control will lead to the
termination of the relationship between the COMPANY and its normal customers or
suppliers. ENTRUST has been made aware that it might be preferable to maintain
the name of the COMPANY and the Swiss character of the COMPANY to avoid negative
impacts on the relationship with the COMPANY's customers and suppliers.

4.3.13.2. The execution of the AGREEMENT and the observance and performance of
its provisions by the SELLER, including the spin-off of the WATERMARK business,
will not:

(a) result in a breach of any contract, law, regulation, order, judgement,
injunction, undertaking, decree or other like imposition to or by which the
COMPANY is a party or is bound, or entitle any person to terminate or avoid
any contract to which the COMPANY is a party, or have any material effect
on any such contract;

(b) result in the loss or impairment of or any default under any licence,
authorization or consent required by the COMPANY for the purposes of its
business;

(c) result in the creation, imposition, crystallisation or enforcement of any
encumbrance whatsoever on any of the assets of the COMPANY;
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(d) result in any present indebtedness of the COMPANY becoming due and payable,
or capable of being declared due and payable, prior to its stated maturity
date or in any financial facility of the COMPANY being withdrawn; or

(e) result in any grant or subvention to the COMPANY, in connection with any
research, developement, or consulting project being cancelled or claimed
back;

4.3.13.3. There is no contract to which the COMPANY is party which formally
depends on the continuation of the connection (whether as an officer of the
COMPANY or otherwise) of any person with the COMPANY.

4.3.13.4. Notwithstanding the intended generality of the above, the
representations made in this Sec. 4.3.13 are limited by the specific
qualifications made in this agreement (e.g. in Sec. 4.3.7.1) and by the general
principles governing the liability of the SELLER and laid down in Sec. 5.4.

4.3.14. Other material items

To the SELLER's best knowledge there is no fact, contractual or legal
obligations, which has or may have a material adverse effect on the value of the
COMPANY, and which, if known to ENTRUST prior to the date of this AGREEMENT,
could have caused ENTRUST not to enter into this AGREEMENT.

5. Warranty Claims Against Seller

5.1. Subject to the provisions of this AGREEMENT, the SELLER shall be liable
to ENTRUST for any breach of the representations made in Sec. 4 above (a
"DEFECT"), and shall indemnify and hold ENTRUST (or at the option of ENTRUST,
the COMPANY) harmless against any damage incurred by ENTRUST or by the COMPANY,
unless ENTRUST was aware of the DEFECT at SIGNING.

5.2. In order to account for the effective participation of the SELLER in the
COMPANY's capital, the liability of the SELLER for the damage caused by the
DEFECT shall be reduced to 59.274 % of the damage, unless such damage affects
directly the SHARES.

5.3. For the purpose of any claim for the reduction of the PURCHASE PRICE in
connection with any DEFECT, such DEFECT shall be deemed to affect pro rata the
value of the SHARES in the same manner as it affects the value of the COMPANY.
The hypothetical value of the SHARES without the DEFECT shall be deemed to be
equal to
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the PURCHASE PRICE, or, if no PRICE ADJUSTMENT was payable, to the BASIS
PRICE.

5.4. ENTRUST shall notify the SELLER in writing of any DEFECT no later than 45
days after ENTRUST has become aware of such DEFECT. ENTRUST shall not be deemed
to have been aware of, or to have accepted any DEFECT, unless such DEFECT has
been clearly disclosed by the COMPANY (i) in the course of the due diligence or
(ii) in the documents and information provided to ENTRUST and listed in the
answers to the due diligence questionnaire dated 10 May 1998, as attached in
Exhibit DIL. The requirement that ENTRUST examine the object of the sale after
CLOSING pursuant to Art. 201 CO is waived.

5.5. The claims of ENTRUST in connection with any DEFECT shall be subject to a
statute of limitation of 24 months after CLOSING and of one year after the
notification of the DEFECT by ENTRUST pursuant to Sec. 5.2., provided, however,
that claims raised in connection with taxes for any given tax period shall
expire one year after the final assessment for such tax period.

5.6. No claim may be raised against the SELLER in connection with any DEFECT,
unless the aggregate amount of the damage claimed by ENTRUST against the SELLER
and/or any other person in connection with DEFECTS exceeds CHF 100,000.--. The
maximum aggregate amount of warranty claims against the SELLER shall be limited
to 59.274% of CHF 15,000,000. If a DEFECT affects only the value of the SHARES,
without any damage for the COMPANY, the claim of ENTRUST shall be limited to the
PURCHASE PRICE paid.

5.7. A rescission of the sale of the SHARES is excluded.

6. Representations of Entrust

6.1. Good Standing and Authority

6.1.1. ENTRUST is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland, United States of America, and
has requisite power and authority (corporate and other) to own its properties,
to carry on its business as now being conducted, to execute and deliver this
AGREEMENT and to consummate the transactions contemplated hereby.
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6.1.2. The execution and delivery of this AGREEMENT by ENTRUST, and the
consummation by ENTRUST of all transactions contemplated hereby, have been duly
authorized by all requisite corporate action on the part of ENTRUST.

6.2. Consideration Shares

All CONSIDERATION SHARES will be, when issued in accordance with this AGREEMENT,
duly authorized, validly issued, fully paid and nonassessable.

6.3. Capitalization

6.3.1. As of the date of this AGREEMENT, the authorized capital stock of ENTRUST
consists of (a) 15,000,000 shares of Series A Common Stock, USD .01 par value
per share, of which approximately 5,078,010 shares are issued and outstanding,
(b) 260,000 shares of Series B Common Stock, USD .01 par value per share, of
which 221,052 shares are issued and outstanding, (c) 260,000 shares of Series B
Non-Voting Common Stock, of which 38,948 shares are issued and outstanding, (d)
2,500,000 shares of Special Voting Stock, USD .01 par value per share, of which
1,925,000 shares are issued and outstanding, and (e) 500,000 shares of Preferred
Stock, USD .01 par value per share, none of which shares are issued or
outstanding. ENTRUST's Series A Common Stock.

6.3.2. In addition to the issued stock of ENTRUST, as of the date of this
AGREEMENT, ENTRUST has reserved 1,857,230 shares of Series A Common Stock for
issuance pursuant to the 1996 Stock Incentive Plan. ENTRUST anticipates
reserving additional Series A Common Stock for issuance pursuant to the 1996
Stock Incentive Plan or similar plan.

6.3.3. The capital stock table of ENTRUST attached hereto as Exhibit CAP shows
the approximate fully diluted capital structure of ENTRUST at CLOSING.

6.3.4. As a holder of CONSIDERATION SHARES, the SELLER shall have the same
rights, preferences and privileges as the other holders of ENTRUST's Series A
Common Stock.

6.4. Governmental Consents

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AGREEMENT, the offer, issuance, sale and delivery of the CONSIDERATION SHARES,
or the other transactions to be consummated at the CLOSING, as contemplated by
this AGREEMENT.

6.5. Warranty Claims Against Entrust

6.5.1. Warranty claims in connection with a breach of the representations of
ENTRUST made under Sec. 6.1 to 6.3 are subject to the following limitations:

(a) The claims shall be capped at USD 10.-- per CONSIDERATION SHARE, i.e. the
difference between the agreed upon price per CONSIDERATION SHARE of USD
58.30 and the price of USD 48.30 guaranteed by Sec. 2.4.2.

(b) If the conditions for the exercise of PUT RIGHT pursuant to Sec. 2.4.1.
are fulfilled, any warranty claim shall be excluded altogether.

6.5.2. If the breach of Sec. 6.4.3 impairs the enforceability of the PUT RIGHT
of Sec. 2.4.1. and 2.4.3, the claim shall be capped at 58.30 per CONSIDERATION
SHARE

6.5.3. Without prejudice to the foregoing, Warranty Claims shall be subject to a
time-bar of 24 months following CLOSING.

7. Covenants

7.1. Management of the Company

7.1.1. Starting on the date of this AGREEMENT and until the earlier of (i) three
months following CLOSING or (ii) the issuance by the COMPANY of new
organizational by-laws under the control of ENTRUST, the SELLER shall not, alone
or acting with others, without the prior consent of ENTRUST:

(a) cause the business of the COMPANY to be conducted in any manner
inconsistent with the ordinary and usual course of the COMPANY's
business;

(b) cause the COMPANY to enter into any contract or into any commitment which
is likely to have a material adverse effect upon the operations or
activities of the COMPANY or the value of the COMPANY for ENTRUST;
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(c) cause the COMPANY to terminate any of the employment agreements with any
person employed by the COMPANY at the date of this AGREEMENT or to
transfer the title to any of the INTELLECTUAL PROPERTY listed in Exhibit
IPR;

(d) take any other action which is inconsistent with the provisions of this
AGREEMENT; or

(e) cause the COMPANY to sell any COMPANY SHARES held in treasury, or to
issue any new COMPANY SHARE or options, or to take any action which would
change the situation with respect to the COMPANY SHARES and, generally,
the COMPANY's capital, as represented in Sec.4.2.

7.1.2. The expenses incurred by the COMPANY in connection with the current
venture capital round shall not be charged to the COMPANY. No fees shall be paid
in connection with any work performed by or on behalf of INVISION.

7.2. Product Liability

7.2.1. The SELLER undertakes to hold the COMPANY free of any harm caused by
warranty claims in connection with defects affecting the products of the COMPANY
existing at CLOSING, provided, however, that ENTRUST cannot call upon this
covenant in connection with any product of the COMPANY if (i) ENTRUST or the
COMPANY fails to show reasonable care in maintaining such product or in
responding to customers' requests with respect to such product, or (ii) if
ENTRUST or the COMPANY made any modification to such product. The claim of
ENTRUST may only be raised if the warranty claims against the COMPANY exceed in
aggregate an amount of CHF 250,000, and if such claims are notified to the
COMPANY within 12 months following CLOSING. The claim of ENTRUST against the
SELLER shall be limited to 59.274 % of the excess of the aggregate warranty
claims raised against the COMPANY over CHF 250,000.--.

7.2.2. The claim of ENTRUST against the SELLER pursuant to this Sec. 7.2 is
subject to and shall be covered by the cap of Sec. 5.6.

7.3. Consideration Shares

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unless such CONSIDERATION SHARES are registered under the SECURITIES ACT or an
exemption from the registration requirements of the SECURITIES ACT is available,
offer, sell or transfer the CONSIDERATION SHARES in the United States or to, or
for the account or benefit of, a U.S. person. The SELLER understands that the
CONSIDERATION SHARES or any interest therein are only transferable on the books
and records of the transfer agent and registrar of ENTRUST. The SELLER further
understands that neither ENTRUST nor its transfer agent and registrar will
register any transfer of the CONSIDERATION SHARES except in accordance with the
provisions of REGULATION S, pursuant to registration under the SECURITIES ACT or
pursuant to an available exemption from registration, and that ENTRUST may place
stop transfer orders with its transfer agent with respect to certificates
representing CONSIDERATION SHARES.

7.3.2. Unless the CONSIDERATION SHARES shall first have been registered under
the SECURITIES ACT, any proposed offer, sale or transfer during the DISTRIBUTION
COMPLIANCE PERIOD of any of the CONSIDERATION SHARES shall be subject to the
condition that the SELLER must deliver to ENTRUST;

(a) a written certification that neither record nor beneficial ownership of
the CONSIDERATION SHARES has been offered or sold in the United States or
to, or for the account or benefit of, any U.S. person;

(b) a written certification of the proposed transferee that such transferee
(or any account for which such transferee is acquiring such CONSIDERATION
SHARES) is not a U.S. person, that such transferee is acquiring such
CONSIDERATION SHARES for such transferee's own account (or an account
over which he or she has investment discretion) and that such transferee
is knowledgeable of and agrees to be bound by the restrictions on re-sale
set forth in this Agreement and REGULATION S during the DISTRIBUTION
COMPLIANCE PERIOD, and

(c) a written opinion of United States counsel, in form and substance
reasonably satisfactory to ENTRUST, to the effect that the offer, sale
and transfer of such CONSIDERATION SHARES are exempt from registration
under the SECURITIES ACT. Any CONSIDERATION SHARES offered, sold or
transferred during the DISTRIBUTION COMPLIANCE PERIOD in accordance with
the foregoing restrictions will continue to be deemed "restricted
securities" under Rule 144 of the SECURITIES ACT, notwithstanding that
they were acquired in a resale transaction made pursuant to Rules 901 or
904 of REGULATION S.

7.3.3. Rule 144. The SELLER understands that "restricted securities" may be
resold in the United States or to, or for the benefit of, U.S. persons in
accordance with Rule 144
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of the SECURITIES ACT. The SELLER acknowledges that the following is a summary
of the resale requirements of Rule 144, and such summary is qualified in its
entirety by reference to such rule, a copy of which was previously provided to
the SELLER.

7.3.4. Rule 144, as currently in effect, imposes the following requirements on
any holder of restricted securities:

(a) at the time of resale, ENTRUST must have been a public company for at
least 90 days (i.e., ENTRUST must have securities registered pursuant to
Section 12 of the United States Securities Exchange Act of 1934, as
amended, and have filed all reports required to be field thereunder
during the 12 months preceding the sale (or for such shorter period as
ENTRUST is a public company);

(b) the holder of restricted securities must have held such securities for at
least one year;

(c) the number of shares of Series A Common Stock sold by the holder within
any three-month period may not exceed the greater of (a) 1% of the number
of outstanding shares of Series A Common Stock or (b) the average weekly
trading volume of the Series A Common Stock during the four calendar
weeks preceding the filing of the Form 144;

(d) the holder must sell the securities only in "brokers' transactions" or in
transactions directly with a "market maker," which transactions may not
involve any solicitations of orders to buy the securities or any payments
to any person other than the broker executing the sale order; and

(e) the holder must mail three copies of a Form 144 to the United States
Securities and Exchange Commission at the same time as he or she places
the sale order with the broker.

7.3.5. After the holder of CONSIDERATION SHARES has held the CONSIDERATION
SHARES for two years, and assuming the holder has not been an affiliate of
ENTRUST (such as an officer, director or principal stockholder) during the
preceding three months, ENTRUST shall, to the extent permitted by law, at the
request of SELLER remove the restrictive legend from the CONSIDERATION SHARES
under Rule 144(k). Thereafter, and in respect of the transfers made in
accordance with Rule 144, the holder need not comply with the restrictions on
resale noted above.

7.3.6. A legend substantially in the following form will be placed on the
certificates representing the CONSIDERATION SHARES which may be issued to the
SELLER.
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"The shares represented by this certificate have not been registered under the
United States Securities Act of 1933, as amended, and may not be offered, sold
or otherwise transferred, pledged or hypothecated (i) unless and until such
shares are registered under such Act or an opinion of counsel satisfactory to
Entrust Technologies Inc. is obtained to the effect that such registration is
not required or (ii) except in accordance with Regulation S of such Act. Hedging
transactions involving the shares represented by this certificate may not be
conducted except in compliance with the Securities Act of 1933, as amended.

The sale or other disposition of any of the shares represented by this
certificate is restricted by a Share Purchase Agreement entered into by the
holder of this certificate and Entrust Technologies Inc. A copy of the Share
Purchase Agreement is available for inspection during normal business hours at
the principal executive office of the corporation."

7.3.7. The SELLER, if requested by ENTRUST or the managing underwriter of a
public offering of ENTRUST's Series A Common Stock or other securities pursuant
to a registration statement under the SECURITIES ACT (a "REGISTRATION
STATEMENT"), shall agree not to sell publicly or otherwise transfer or dispose
of any CONSIDERATION SHARES or other securities of ENTRUST held by the SELLER
for a specified period of time (not to exceed 180 days) following the effective
date of such REGISTRATION STATEMENT; provided, however, that.

(a) such agreement shall only apply to the first REGISTRATION STATEMENT
covering Series A Common Stock or other securities to be sold to the
public in an underwritten offering, and

(b) all stockholders of ENTRUST holding not less than the number of shares of
Series A Common Stock held by the SELLER and all officers and directors
of ENTRUST enter into similar agreements.

7.3.8. ENTRUST represents that it has only made offers to sell the CONSIDERATION
SHARES outside the U.S.A. and that it did not generally advertise in the U.S.A.
in respect to the offering for sale or sale of the CONSIDERATION SHARES.

7.4. Watermark Business

7.4.1. The Watermark intellectual property (watermark specific software and
filed patents) shall be transferred to a separate entity (the "WATERMARK
COMPANY") prior to CLOSING in consultation with ENTRUST. The Company shall be
indemnified for any claims arising from or relating to the Watermark
intellectual property, either before or after CLOSING. To the extent that the
COMPANY is under any obligation to perform
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any work on behalf of the WATERMARK COMPANY or in connection with the Watermark
intellectual property, such obligation will be taken over by the WATERMARK
COMPANY at no cost for the COMPANY. If such transfer is not possible, the
WATERMARK COMPANY will pay an arm's length consideration to the COMPANY and
grant to the COMPANY at no charge all licenses necessary for the performance of
such work.

7.4.2. Any costs (including legal costs) or taxes imposed on the COMPANY or on
ENTRUST in connection with the transfer of the watermark intellectual property
to the WATERMARK COMPANY shall be borne by the SELLER in the same proportion as
determined by Sec. 5.2 in respect of the representations and warranties.

7.4.3. The SELLER undertakes to hold his participation in the WATERMARK COMPANY
at arm's length, and, especially, not to engage in any kind of work for the
WATERMARK COMPANY as a director, consultant, employee, agent or in any other
position whatsoever, whether remunerated or not.

7.5. Offer to other Sellers

Provided that this AGREEMENT closes pursuant to Sec. 3.1 above, ENTRUST
undertakes to purchase during a period of 90 days after CLOSING any and all
outstanding COMPANY SHARES offered to it pursuant to any share purchase
agreement established in the form of Exhibit OTH, and completed in accordance
with the principles applied for the calculation of the figures contained in the
share purchase agreements entered into with the other sellers excluding
INVISION.

8. Miscellaneous

8.1. Costs

8.1.1. Each Party shall bear its own costs, taxes and expenses relating to the
preparation, CLOSING and implementation of this AGREEMENT.

8.2. Confidentiality

Effective as of CLOSING, ENTRUSTS' obligation to the keep confidential the
information received on the COMPANY shall terminate.
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8.3. Assignment

8.3.1. The rights and obligations of the PARTIES out of this AGREEMENT may not
be assigned, provided, however, that ENTRUST is authorized to assign such rights
and obligations to any of its affiliates.

8.3.2. In case of such an assignment of the contract by ENTRUST to any of its
affiliates pursuant Sec. 8.3.1, a letter of comfort or a guarantee of ENTRUST
shall be delivered to the SELLERS.

8.4. Announcements

No announcement concerning the transaction contemplated by this AGREEMENT or any
matter ancillary to it and no disclosure of the terms of this AGREEMENT (save as
required by law, by any market regulations or as expressly provided in this
AGREEMENT) shall be made by the SELLER to any person or entity, except with the
prior written approval of ENTRUST.

8.5. Notices

8.5.1. Any notice or other communication to be given under this letter shall be
in writing and shall be delivered by hand or sent by registered post or by
courier to the address specified below, or sent by facsimile to the number
specified below;

(a) ENTRUST: General Counsel, Entrust Technologies Inc. 2323 North Central
Expressway, Richardson, Texas, 75080, phone: 001 972 994 8020, fax 001
972 994 8005

(b) SELLER: Rainer A. Rueppel c/o Dr. Markus Kroll, Altenburger & Partners,
Alte Landstrasse 128, 8702 Zollikon, Switzerland, Phone: + 41 1 392 00
07; Fax: + 41 1 392 00 86

8.5.2. Either Party hereto may change the address, facsimile number or name of
the person for whose attention notices are to be addressed by serving a notice
on the other party hereto in accordance with Sec. 8.5.1.

8.5.3. Each such notice or other communication shall be effective:
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(a) if given by facsimile when the facsimile is transmitted to the facsimile
number specified in para. 8.5.1 or

(b) if given by any other means, when received at the address specified in
para. 8.5.1.

8.6. Severability

Whenever possible, each provision of this AGREEMENT shall be interpreted in such
manner as to be effective and valid under the applicable law, but if any
provision of this AGREEMENT shall be unenforceable or invalid under applicable
law, such provision shall be ineffective only to the extent of such
unenforceability or invalidity and be replaced by such valid and enforceable
provision which bona fides parties would consider to match as closely as
possible the invalid or unenforceable provision, attaining the same or a similar
economic effect. The remaining provisions of this AGREEMENT shall under all
circumstances continue to be binding and in full force and effect.

8.7. Construction, amendments

8.7.1. This AGREEMENT constitutes the entire agreement among the parties and,
except as otherwise provided, supersedes any prior understandings or agreements,
written or oral, that relate to the acquisition of COMPANY SHARES by ENTRUST.

8.7.2. This AGREEMENT may not be amended except in writing, including
communications by letter, facsimile, or E-mail.

8.7.3. The PARTIES agree that the AGREEMENT shall not be construed against any
PARTY on the ground that such PARTY drafted or prepared the AGREEMENT.

8.8. Governing law

This AGREEMENT shall be governed by the internal law of Switzerland; the
application of the Vienna (United Nations) Convention on Contracts for the
International Sale of Goods is excluded.

8.9. Arbitration

All disputes arising out of or in connection with the present agreement,
including disputes on its conclusion, binding effect, amendment and termination
shall be resolved,
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to the exclusion of the ordinary courts by a three-person Arbitral Tribunal in
accordance with the International Arbitration Rules of the Zurich Chamber of
Commerce. The language of the arbitration shall be English.

List of Exhibits

- - Exhibit DIL (List of Documents submitted to Entrust)

- - Exhibit CAP (Capital Structure of Entrust)

- - Exhibit IPR (Intellectual Property)

- - Exhibit OTH (Offer to Other Sellers)

Zug, this 30 May 1998 Zug, this 30 May 1998

ENTRUST Technologies Inc. The SELLER:

/s/ Brad Ross /s/ Rainer A. Rueppel
- ------------------------- ------------------------------
Name: Brad Ross Rainer A. Rueppel
Title: President
<PAGE>

ENTRUST TECHNOLOGIES

Mr. Rainer A. RUEPPEL
Stationsstrasse 30
CH-8621 Wetzikon

CONSIDERATION SHARES

Dear Mr. RUEPPEL

Reference is made to the share purchase agreement between yourself and ourselves
for the purchase of shares in R3 Security Engineering AG closed on 8 June 1998
(the "Share Purchase Agreement").

The purpose of this letter is the amendment of the Share Purchase Agreement with
respect to its Section 7.3 as follows:

Rule 144 Reporting Requirements

From and after the time ENTRUST has securities registered under Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
in order to permit the Seller to sell the CONSIDERATION SHARES it holds, if it
so desires, from time to time pursuant to Rule 144 or any successor to such rule
or any other rule or regulation of the Securities and Exchange Commission (the
"Commission") that may at any time permit the SELLER to sell its CONSIDERATION
SHARES to the public without registration (the "Resale Rules"), ENTRUST will:

a) comply with all rules and regulations of the Commission applicable in
connection with use of the Resale Rules;

b) make and keep adequate and current public information available, as
those terms are understood and defined in the Resale Rules, at all
times;

c) file with the Commission in a timely manner all reports and other
documents required of ENTRUST under the Securities Act and Exchange
Act;

d) furnish to the SELLER forthwith upon request (i) a written statement
by ENTRUST that it has complied with the reporting requirements of the
Resale Rules, the Securities Act and Exchange Act, (ii) a copy of the
most recent annual or quarterly report of ENTRUST and any other
reports and
<PAGE>

documents filed by ENTRUST under the Securities Act or the Exchange
Act, and (iii) such other information as may be reasonably requested
in availing the SELLER of any rule or regulation of the Commission
which permits the selling of any such CONSIDERATION SHARES without
registration; and

e) take any action (including cooperation with the SELLER to cause the
transfer agent to remove any restrictive legend on certificates
evidencing the CONSIDERATION SHARES) which shall be reasonably
requested by the SELLER or which shall otherwise facilitate the sale
of the CONSIDERATION SHARES from time to time by the SELLER pursuant
to the Resale Rules.

Rule 144A Information

Until such time as ENTRUST is subject to Section 13 or 15(d) of the Exchange
Act, ENTRUST will make available, upon request, to the SELLER and prospective
purchaser or transferee of the CONSIDERATION SHARES designated by the Seller,
the information required to allow the resale or other transfer of such
CONSIDERATION SHARES pursuant to Rule 144A under the Securities Act.

Sec. 7.3.7

The legend to be placed on the certificates representing CONSIDERATION SHARES
shall include the following additional transfer exception:

or (iii) except to a "qualified institutional buyer" (as defined in Rule 144A
promulgated under the Securities Act) in a transaction which meets the
requirements of such Rule 144A.

Zurich, 8 June 1998

Entrust Technologies Inc.

/s/ Brad Ross
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Brad Ross
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ENTRUST TECHNOLOGIES

Mr. Rainer A. RUEPPEL
Stationsstrasse 30
CH-8621 Wetzikon

Watermark spin-off

Dear Mr. RUEPPEL

We confirm to you herewith that Entrust will bear up to CHF 30,000.-- of legal
fees in connection with the spin-off of the Watermark business. Sec. 7.4.2. of
the Share Purchase Agreement should, therefore, read as follows:

"Except for an aggregate of up to CHF 30,000.-- of legal fees, any fees,
costs or taxes imposed on the COMPANY or on ENTRUST in connection with the
transfer of the watermark intellectual property to the WATERMARK COMPANY
shall be borne by the SELLER in the same proportion as determined by Sec.
5.2 in respect of the representations and warranties."

Pursuant to the information received from Dr. Markus Kroll on 6 June 1998, the
tax authorities decided to levy against r3 Security Engineering AG a withholding
tax of CHF 177,697 in connection with the distribution of the shares in
Securights AG as a dividend. Since such taxes are to be borne pro rata by the
Sellers, we will in due course, send you an invoice for your portion of the
taxes, as determined in Sec. 7.4.2. of the Share Purchase Agreement. Indeed, you
may be entitled, to claim back this amount from the tax authorities in
accordance with the tax legislation.

We thank you for your comprehension.

Zurich, 8 June 1998

Entrust Technologies, Inc.

/s/ Brad Ross
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Brad Ross

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Exhibit 2.5

Form of Share Purchase Agreement

between

ENTRUST Technologies Inc., a Maryland corporation (hereinafter referred to
"ENTRUST")

on the one part
and

[Name], [Address] (hereinafter referred to as
the "SELLER"),

on the other part

(hereinafter collectively referred to as "the PARTIES")

concerning the acquisition of shares of

R/3/ Security Engineering AG
Seegraben

(the "COMPANY")
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TABLE OF CONTENTS

Definitions.................................................................iii

1. Sale and Purchase.......................................................1

1.1. Object of the Sale...............................................1
1.2. Amount of Purchase Price.........................................1
1.3. Basis Price......................................................1
1.4. Price Adjustment.................................................1
1.5. Escrow...........................................................1

2. Consideration Shares....................................................2

2.1. Value of Consideration Shares....................................2
2.2. Restrictions on Transfer.........................................3
2.3. Right of First Refusal...........................................3
2.4. Put Option and Make Whole Payment................................4

3. Closing.................................................................6

3.1. Conditions Precedent.............................................6
3.2. Completion of the sale...........................................6
3.3. Transfer of Risks................................................7

4. Representations of Seller...............................................7

4.1. With Respect to US Securities Regulations........................7
4.2. With Respect to the SHARES and the COMPANY's Capital............10
4.3. With Respect to the COMPANY.....................................10

5. Warranty Claims Against Seller.........................................19

6. Representations of Entrust.............................................20

6.1. Good Standing and Authority.....................................20
6.2. Consideration Shares............................................20
6.3. Capitalization..................................................20
6.4. Governmental Consents...........................................21
6.5. Warranty Claims Against Entrust.................................21

7. Covenants..............................................................22

(i)
<PAGE>

7.1. Management of the Company........................................22
7.2. Product Liability................................................22
7.3. Consideration Shares.............................................23
7.4. Watermark Business...............................................25

8. Miscellaneous...........................................................26

8.1. Costs............................................................26
8.2. Confidentiality..................................................26
8.3. Assignment.......................................................26
8.4. Announcements....................................................26
8.5. Notices..........................................................27
8.6. Severability.....................................................27
8.7. Construction, amendments.........................................27
8.8. Governing law....................................................28
8.9. Arbitration......................................................28

List of Exhibits.............................................................28

-------------------

Entrust Technologies Inc. has omitted the following schedules, which will be
provided supplementally to the Securities and Exchange Commission upon request:

- - Exhibit DIL (List of Documents Submitted to Entrust)

- - Exhibit CAP (Capital Structure of Entrust)

- - Exhibit IPR (Intellectual Property)

(ii)
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Definitions

"AGREEMENT"
this share purchase agreement, including
the exhibits;

"BASIS PRICE" the BASIS PRICE as defined in Sec. 1.3.;

"CLOSING" the CLOSING of this AGREEMENT
pursuant to Sec. 3;

"CO" the Swiss Code of Obligations;

"COMPANY SHARES" the common or preferred registered shares
of the COMPANY with a par value of
CHF 10 each;

"COMPANY" r/3/ Security Engineering AG, Seegraben, as
defined on the first page;

"CONSIDERATION
SHARES" Series A Common Stock of ENTRUST with
p.v. of USD 0.01 each;

"DEFECT" a DEFECT as defined in Sec. 5.1;

"DISTRIBUTION
COMPLIANCE PERIOD" the DISTRIBUTION COMPLIANCE
PERIOD defined in Sec. 7.3.;

"ENTRUST" ENTRUST Technologies Inc., a Maryland
corporation, as defined on the first page;

"ESCROW AGENT" Thouvenin Stutzer Eggimann & Partner,
Limmatquai 4, 8001 Zurich;

"ESCROW
AGREEMENT" the escrow agreement entered into between
ENTRUST, the SELLER and the ESCROW AGENT,
and signed by the SELLER on the same
date as this AGREEMENT;

(iii)
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"ESCROW" the escrow established pursuant to the
ESCROW AGREEMENT and referred to in
Sec. 1.5;

"FIRST ANNIVERSARY" the FIRST ANNIVERSARY defined in Sec.
2.4.1.;

"GOVERNMENTAL
AUTHORITY" any government, state, municipality or
other political subdivision thereof and
any entity exercising executive,
legislative, judicial, regulatory or
administrative functions of or pertaining
to government

"INTELLECTUAL
PROPERTY" the INTELLECTUAL PROPERTY defined
in Sec. 4.3.5.2;

"INVISION" INVISION AG, Neuhofstrasse 4, 6341
Baar;

"IPO PUT PRICE" the IPO PUT PRICE defined in Sec. 2.4.2;

"MAKE WHOLE PAYMENT" the MAKE WHOLE PAYMENT defined in
Sec. 2.4.2;

"MARKET PRICE" the MARKET PRICE defined in Sec. 2.4.3;

"NOTICE" the NOTICE defined in Sec. 2.3.3;

"OFFERED CONSIDERATION
SHARES" the OFFERED CONSIDERATION SHARES
defined in Sec. 2.3.3;

"OFFEROR" the OFFEROR defined in Sec. 2.3.3;

"outstanding" in respect of COMPANY SHARES, the
issued COMPANY SHARES less the
COMPANY SHARES held in treasury;

"PARTY" ENTRUST and/or the SELLER, as defined
on the first page;

(iv)
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"PRICE ADJUSTMENT" the PRICE ADJUSTMENT, as defined in
Sec. 1.4.;

"PRINCIPAL MARKET" the PRINCIPAL MARKET defined in Sec.
2.4.3;

"PUBLIC OFFERING" the PUBLIC OFFERING defined in Sec.
2.3.6;

"PURCHASE PRICE" the total consideration paid by ENTRUST
for the SHARES, as defined in Sec. 1.2.;

"PUT RIGHT" the PUT RIGHT defined in Sec. 2.4.1;

"PUT SHARES" the PUT SHARES defined in Sec. 2.4.1;

"REGULATION S" the REGULATION S defined in Sec. 4.1.1.;

"SECURITIES ACT" the U.S. Securities Act of 1933, as
amended;

"SELLER" [Name], [Address], as defined on the first
page;

"SHARES" the COMPANY SHARES sold by the SELLER
pursuant to Sec. 1.1.;

"SIGNING" the SIGNING of this AGREEMENT;

"STANDARD PUT PRICE" the STANDARD PUT PRICE defined in
Sec. 2.4.1;

"WATERMARK COMPANY" the WATERMARK COMPANY defined in
Sec. 7.4.;

(v)
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1. Sale and Purchase

1.1. Object of the Sale

ENTRUST purchases from the SELLER, and the SELLER sells to ENTRUST [___] COMPANY
SHARES ("the SHARES") pursuant to the terms and conditions of this AGREEMENT.

1.2. Amount of Purchase Price

The PURCHASE PRICE shall be composed of (i) the BASIS PRICE and, if any, the
PRICE ADJUSTMENT, provided, however, that such PRICE ADJUSTMENT shall be due
only if, within 90 days after CLOSING, ENTRUST obtains directly or through the
COMPANY 100 % of the COMPANY SHARES. The right of the SELLER to the PRICE
ADJUSTMENT expires at midnight on the 90th day after CLOSING.

1.3. Basis Price

The BASIS PRICE shall be paid to the Seller at CLOSING in (i) USD [____]-- and
(ii) [____] CONSIDERATION SHARES, valued at USD 58.30 each pursuant to Sec.
2.1.1.

1.3.1. Notwithstanding the previous Sec. 1.3.1., [____] out of the [_____]
CONSIDERATION SHARES shall be placed into ESCROW pursuant to Sec 1.5.

1.4. Price Adjustment

1.4.1. The PRICE ADJUSTMENT, if any, shall be composed of [___] CONSIDERATION
SHARES.

1.4.2. The PRICE ADJUSTMENT, if any, shall be paid to the SELLER within 10
business days after ENTRUST obtains directly or through the COMPANY 100 % of the
COMPANY SHARES. The CONSIDERATION SHARES composing the PRICE ADJUSTMENT shall be
paid to the SELLER in accordance with the SELLER's instructions. If the
conditions for the payment of the PRICE ADJUSTMENT are already fulfilled at
CLOSING, the payment of the PRICE ADJUSTMENT shall take place at the later (i)
of CLOSING or (ii) five business days following the receipt by ENTRUST of the
share purchase AGREEMENTS for all outstanding COMPANY SHARES.

1.5. Escrow

1.5.1. The [____] CONSIDERATION SHARES held in ESCROW pursuant to Section 1.3.1.
shall be delivered to, kept and/or released by the ESCROW AGENT pursuant to the
ESCROW AGREEMENT. The CONSIDERATION SHARES and any cash proceeds from the sale
of such CONSIDERATION SHARES whilst held in
<PAGE>

ESCROW pursuant to Sec. 1.5.4 hereof shall be deposited by the ESCROW AGENT in a
Swiss bank of international standing and reputation.

1.5.2. [Intentionally omitted pursuant to waiver letter of ENTRUST]

(a) [Intentionally omitted pursuant to waiver letter of ENTRUST]

(b) during a period of 24 months after CLOSING, the number of CONSIDERATION
SHARES held in escrow shall not be reduced to less than [___]
CONSIDERATION SHARES, or to such amount as adjusted to account for a MAKE
WHOLE PAYMENT pursuant to Sec. 2.4.2 hereof.

1.5.5. Variations in the price of the CONSIDERATION SHARES shall not cause any
variation in the number of CONSIDERATION SHARES to be put in ESCROW.

1.5.6. The specific terms and conditions of the ESCROW AGREEMENT are reserved.

2. Consideration Shares

2.1. Value of Consideration Shares

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2.2. Restrictions on Transfer

2.2.1. The CONSIDERATION SHARES are restricted securities. They are the object
of the representations and warranties of Sec. 4.2 and of the covenants of Sec.
6.3.

2.3. Right of First Refusal

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consideration per SHARE to be delivered to the SELLER for the proposed sale,
transfer or disposition, and (iv) all other material terms and conditions of the
proposed transaction.

2.3.3. In the event ENTRUST duly exercises its option to purchase the OFFERED
CONSIDERATION SHARES, the closing of such purchase shall take place at the
offices of the COMPANY, or at any other place mutually agreed between the
PARTIES five (Swiss) business days after the expiration of deadline for the
exercise of the right of first refusal pursuant to Section 2.3.2. above. If
ENTRUST does not exercise its option to purchase the CONSIDERATION SHARES, the
closing of the sale must take place in accordance with the terms and conditions
specified in the NOTICE no later than 60 days after the expiration of the option
of ENTRUST.

2.3.6. The right of first refusal of ENTRUST set forth in this Section 2.3 shall
terminate upon the closing of ENTRUST's initial public offering of Series A
Common Stock pursuant to an effective registration statement under the
SECURITIES ACT (a "PUBLIC OFFERING").

2.4. Put Option and Make Whole Payment

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exercises its PUT RIGHT, the SELLER agrees to sell the PUT SHARES to ENTRUST,
and ENTRUST agrees to purchase the PUT SHARES from the SELLER, at a price of USD
$58.30 (subject to adjustment for stock dividends, stock splits and other
recapitalizations) (the "STANDARD PUT PRICE"). The PUT RIGHT is subject to the
following:

(a) [Intentionally omitted pursuant to waiver letter of ENTRUST]

(c) Notwithstanding the previous paragraph and Sec. 1.5.5, any MAKE WHOLE
PAYMENT made in connection with any CONSIDERATION SHARES held in

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escrow pursuant to Sec. 1.5 shall be placed by ENTRUST into ESCROW and
shall be held and released like the CONSIDERATION SHARES it relates to.

3. Closing

3.1. Conditions Precedent

CLOSING is subject to the following conditions precedent:

(a) the approval of the AGREEMENT by the board of directors of the COMPANY;

(b) the approval of the AGREEMENT by the stockholders and the board of
directors of ENTRUST;

(c) the share purchase agreements with Dr. Rainer Rueppel and Invision AG
concerning the sale of all their COMPANY SHARES to ENTRUST have come into
force; and

(d) the Watermark intellectual property has been transferred to the WATERMARK
COMPANY pursuant to Sec. 7.4. prior to CLOSING.

3.2. Completion of the sale

3.2.1. The sale and purchase of the SHARES will be completed at the offices of
Bar & Karrer, Seefeldstrasse 19, 8008 Zurich, at the latest on 8 June 1998
("CLOSING").

3.2.2. At CLOSING, the SELLER shall produce and deliver to ENTRUST:

(a) share certificates endorsed to ENTRUST representing the SHARES;

(b) share certificates endorsed to the COMPANY representing the COMPANY SHARES
held in treasury by the COMPANY as of CLOSING;

(d) the original share register of the Company (Art. 686 CO), duly signed by
the board of directors, and bearing ENTRUST as shareholder for the SHARES,
without any restriction or limitation; and

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(e) the resignation letter of Dr. Markus Kroll and of Mr. Peter Titz.

3.2.3. At CLOSING, ENTRUST shall, on its part, deliver to the SELLER:

(a) a certificate of the Secretary evidencing the decision of the BOARD of
ENTRUST approving this AGREEMENT;

(d) a receipt issued by the ESCROW AGENT as proof that the CONSIDERATION SHARES
to be delivered to the ESCROW AGENT at CLOSING pursuant to Sec. 1.5.1 have
been placed into ESCROW.

3.3. Transfer of Risks

The risks and profits relating to the SHARES and to the COMPANY shall pass to
ENTRUST at CLOSING.

4. Representations of Seller

4.1. With Respect to US Securities Regulations

4.1.1. With respect to the CONSIDERATION SHARES issued to and acquired by the
SELLER hereunder, the SELLER represents and warrants as follows:

(b) The SELLER has sufficient experience in business, financial and investment
matters to be able to evaluate the risks involved in the acquisition of the
CONSIDERATION SHARES and to make an informed investment decision with
respect to such investment.

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<PAGE>

(e) The SELLER has signed this AGREEMENT outside the United States.

4.1.2. The following are definitions contained in REGULATION S as in effect on
the date of this Agreement:

(a) "U.S. person" means:

(i) Any natural person resident in the United States;

(ii) Any partnership or corporation organized or incorporated under the
laws of the United States;

(iii) Any estate of which any executor or administrator is a U.S. person;

(iv) Any trust of which any trustee is a U.S. person;

(v) Any agency or branch of a foreign entity located in the United
States;

(vi) Any non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit
or account of a U.S. person;

(viii) Any partnership or corporation if:

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<PAGE>

- Organized or incorporated under the laws of any foreign jurisdiction;
and

(b) The following are not "U.S. persons":

(ii) Any estate of which any professional fiduciary acting as executor or
administrator is a U.S. person if:

- An executor or administrator of the estate who is not a U.S. person
has sole or shared investment discretion with respect to the assets
of the estate; and

- The estate is governed by foreign law;

(iv) An employee benefit plan established and administered in accordance
with the law of a country other than the United States and customary
practices and documentation of such country;

(v) Any agency or branch of a U.S. person located outside the United
States if:

- The agency or branch operates for valid business reasons; and

- The agency or branch is engaged in the business of insurance or
banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located; and

(vi) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank,

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the Asian Development Bank, the African Development Bank, the United
Nations, and their agencies, affiliates and pension plans, and any
other similar international organizations, their agencies, affiliates
and pension plans.

(c) "United States" means the United States of America, its territories
and possessions, any State of the United States, and the District of
Columbia.

4.2. With Respect to the SHARES and the COMPANY's Capital

4.2.1. The SHARES have been duly issued and are fully paid in. They are free of
any pledge, charge, encumbrances, or restrictions of any kind or nature.

4.2.2. The SELLER has good and valid title to the SHARES and he may freely
dispose of such SHARES without any limitation or restriction of any kind or
nature.

4.2.3. The COMPANY has a an issued share capital of CHF 400'000.-- composed of
40'000.--fully paid in registered shares with a nominal value of CHF 10.-- each.
8'000 of said registered shares are preferred shares. In addition to the issued
share capital, the COMPANY has a conditional capital of CHF 50'000.-- for 5'000
registered shares with a par value of CHF 10.-- each. The COMPANY has no other
issued, authorized or conditional equity.

4.2.5. No prior issue, payment, contribution, sale, redemption, or transfer in
respect of the SHARES, has given or may give rise to any right, claim or action
against the COMPANY or ENTRUST.

4.3. With Respect to the COMPANY

4.3.1. Existence, Good Standing, and Records

4.3.1.1. The excerpt from the Commercial Register and the articles of
association in Exhibit DIL are current, true, and complete.

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4.3.1.3. To the extent that the COMPANY carries business outside of Switzerland,
it is presently in good standing and having the necessary licenses and permits
to carry on its business in these jurisdictions.

4.3.1.4. The COMPANY has no subsidiary, and has no participation in any other
entity, except for its participation in Swiss Security Service Laboratory AG,
Solothurn.

4.3.2. Accounts

4.3.2.2. Subject to the applicable accounting principles, the audited accounts
as of 31 December 1997 (the "Accounts"), as well as the first quarter results,
as per the date they were established:

(a) set forth without overestimation the capital, reserves, assets, and profits
of the COMPANY;

(b) fully provide for all bad or doubtful claims and receivables;

(d) are not affected (except as disclosed in the Accounts) by any extraordinary
or exceptional event, circumstance or item.

4.3.2.4. The accounting records of the COMPANY are up to date and contain
complete and accurate details of all transactions of the COMPANY in compliance
with Art. 662 et seq. and 957 et seq. CO.

4.3.2.5. The COMPANY's records' systems and information, and the means of access
to them, are under the COMPANY's direct control.

4.3.2.6. There was no distribution of, nor any decision or commitment to
distribute any dividend in whatever form for the financial year ending on 31
December 1997. The spin-off of the WATERMARK BUSINESS pursuant to Sec. 7.4. is
reserved.

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<PAGE>

4.3.2.8. The issue prospectus dated 22 May 1998, including the financial
statements contained therein, constitutes full, true and plain disclosure of all
material facts relating to the COMPANY as of such date. The issue prospectus
contains no untrue statement of material facts, and the financial figures
contained in the issue prospectus are based on the same principle as those
applied for the establishment of the Accounts, as represented above in this Sec.
4.3.2.

4.3.3. Financing

4.3.3.1. The COMPANY has not made nor entered into any contract to make any loan
to any person or other arrangement whereby it is or may be owed any money other
than trade debts incurred in the ordinary course of business.

4.3.3.2. The COMPANY is not entitled to the benefit of any debt otherwise than
as the original creditor and has not factored or discounted any debt or agreed
to do so.

4.3.3.3. All of the accounts receivable which are reflected in the Accounts as
owed to the COMPANY (apart from bad and doubtful debts to the extent to which
they have been provided for in the Accounts) or which have subsequently been
recorded in the books of COMPANY have realized or are reasonably expected to
realize in the normal course of collection and within three months of CLOSING
their full value as included in the Accounts, after deduction of any provision
for bad debts.

4.3.3.4. ENTRUST is aware that some employees may have an overdraft with the
COMPANY, such overdraft being in aggregate of no more than CHF 50'000.--.

4.3.4. Technical characteristics

4.3.5. Intellectual property

4.3.5.1. The COMPANY owns, or is licensed or otherwise possesses a right to use,
all INTELLECTUAL PROPERTY (as defined below) used in the operation of its
business

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or necessary for the operation of its business as currently conducted, except as
otherwise disclosed in Exhibit IPR. The COMPANY has taken reasonable measures to
protect the proprietary nature of trade secrets and confidential information (as
defined below) that it owns or uses. Except as disclosed in Exhibit IPR, the
Company has not granted any rights to any of the INTELLECTUAL PROPERTY owned by
the COMPANY (other than any rights in any INTELLECTUAL PROPERTY not owned by the
COMPANY that constitutes commercially available software generally available to
the public) to any person or business entity. To the SELLER's knowledge, no
other person or business entity is infringing, violating or misappropriating any
of the INTELLECTUAL PROPERTY that the COMPANY owns. The COMPANY has acquired all
rights to INTELLECTUAL PROPERTY developed or held by any employees (within the
scope and term of his employment or otherwise relating to the current or
proposed business of the COMPANY) or third parties who developed INTELLECTUAL
PROPERTY for the COMPANY and no outstanding claims for the payment of any
purchase price or indemnity in respect of such INTELLECTUAL PROPERTY is
threatened or outstanding, except as disclosed in Exhibit IPR.

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pursuant to which the COMPANY has granted any rights to any third party with
respect to any of its INTELLECTUAL PROPERTY. The COMPANY has delivered to
ENTRUST or its advisors correct and complete copies of all such patents,
registrations, applications, licenses and agreements (as amended to date) and
has specifically identified and made available to ENTRUST or its advisors
correct and complete copies of all other written documentation evidencing
ownership of, and any claims or disputes relating to, each such item. With
respect to each item of INTELLECTUAL PROPERTY that the COMPANY owns, except as
provided in Exhibit IPR:

(a) the COMPANY possesses all right, title and interest in and to such item;

(b) such item is not subject to any outstanding judgment, order, decree,
stipulation or injunction; and

(c) the COMPANY has not agreed to indemnify any person or business entity for
or against any infringement, misappropriation or other conflict with
respect to such item.

4.3.5.6. With respect to each such item of INTELLECTUAL PROPERTY except as
otherwise disclosed in Exhibit IPR:

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<PAGE>

(a) the COMPANY has not agreed to indemnify any person or business entity for
or against any interference, infringement, misappropriation or other
conflict with respect to such item; and

4.3.6. Insurances

4.3.6.1. Exhibit DIL lists all private insurance contracts concluded by the
COMPANY.

4.3.6.3. There is no insurance claim pending or outstanding and there are no
circumstances likely to give rise to any such claim.

4.3.7. Customers and Suppliers

4.3.7.1. To the SELLER's best knowledge, none of the current COMPANY's customers
or suppliers intends or has threatened to cease or alter their business with the
COMPANY. The SELLER is not aware of the existence of any formal change of
control clause in any material contract with any customer or supplier of the
COMPANY, other than as might be contained in the contracts listed in Exhibit DIL
and provided to ENTRUST. The SELLER has not made and is not expected to make any
investigations as to the intents of the COMPANY's suppliers and customers.

4.3.7.2. Neither the COMPANY nor the SELLER has made extraordinary promises,
commitments or assurances, whether oral or written, express or implied, to the
effect that the COMPANY will or may:

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(a) offer future price reductions, concessions or other special terms to any
customer of the COMPANY;

(b) accept future price increases or additional charges or other special terms
to any supplier of the COMPANY; or

4.3.7.3. There is no assumed contract which the SELLER can reasonably foresee
that will result in any material loss upon performance thereof by the COMPANY
after CLOSING.

4.3.8. Employees

4.3.8.3. All salaries, bonuses or other compensation of any kind and nature have
been timely paid to the COMPANY's employees.

4.3.9. Pensions and social security contributions

4.3.9.1. The COMPANY has paid all contributions it is required to make by law or
by agreement with its employees, with any labor organization, or with any
insurance company with respect to pensions and social security, and especially
all contributions to the AHV / IV, ALV and SUVA.

4.3.9.2. The COMPANY complies with all legal obligations with respect to its
employees' pensions and social security.

4.3.10. Litigation

4.3.10.1. To the knowledge of the SELLER, there are no suits, arbitrations,
administrative or other proceedings (including debt collection proceeding or
other

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insolvency proceedings) in any matter subject to private or to public law,
pending, threatened against or otherwise affecting the COMPANY.

4.3.10.2. The COMPANY is not subject to any judgement, order or decree which has
affected or may affect its business.

4.3.11. Taxes

4.3.11.4. There are no disputes as to taxes nor any tax liens, whether existing
or threatened, on any assets as well as on any income or expense item of the
profit and loss statement of the COMPANY.

4.3.12. Events since Accounting Date and since end of Q1

4.3.12.1. Since 31 December 1997, respectively since 31 March 1998:

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(a) the business of the COMPANY has been carried on in the ordinary and normal
course;

(c) there has been no substantial and abnormal change in the basis or terms on
which clients or suppliers are prepared to do business with the COMPANY.

4.3.12.2. The spin-off of the Watermark business pursuant to Sec. 7.4 is
excluded from the representations made in this Sec. 4.3.12.

4.3.13. Effect of the transaction

4.3.13.2. The execution of the AGREEMENT and the observance and performance of
its provisions by the SELLER, including the spin-off of the WATERMARK business,
will not:

(b) result in the loss or impairment of or any default under any license,
authorization or consent required by the COMPANY for the purposes of its
business;

(c) result in the creation, imposition, crystallization or enforcement of any
encumbrance whatsoever on any of the assets of the COMPANY;

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(e) result in any grant or subvention to the COMPANY, in connection with any
research, development, or consulting project being cancelled or claimed
back;

4.3.14. Other material items

5. Warranty Claims Against Seller

5.1. Subject to the provisions of this AGREEMENT, the SELLER shall be liable to
ENTRUST for any breach of the representations made in Sec. 4 above (a "DEFECT"),
and shall indemnify and hold ENTRUST (or at the option of ENTRUST, the COMPANY)
harmless against any damage incurred by ENTRUST or by the COMPANY, unless
ENTRUST was aware of the DEFECT at SIGNING.

5.2. In order to account for the effective participation of the SELLER in the
COMPANY's capital, the liability of the SELLER for the damage caused by the
DEFECT shall be reduced to 0.986 % of the damage, unless such damage affects
directly the SHARES.

-19-
<PAGE>

in the documents and information provided to ENTRUST and listed in the answers
to the due diligence questionnaire dated 10 May 1998, as attached in Exhibit
DIL. The requirement that ENTRUST examine the object of the sale after CLOSING
pursuant to Art. 201 CO is waived.

5.6. No claim may be raised against the SELLER in connection with any DEFECT,
unless the aggregate amount of the damage claimed by ENTRUST against the SELLER
and/or any other person in connection with DEFECTS exceeds CHF 100'000.--. The
maximum aggregate amount of warranty claims against the SELLER shall be limited
to 0.986 % of CHF 15'000'000. If a DEFECT affects only the value of the SHARES,
without any damage for the COMPANY, the claim of ENTRUST shall be limited to the
PURCHASE PRICE paid.

5.7. A rescission of the sale of the SHARES is excluded.

6. Representations of Entrust

6.1. Good Standing and Authority
6.1.1. ENTRUST is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland, United States of America, and
has requisite power and authority (corporate and other) to own its properties,
to carry on its business as now being conducted, to execute and deliver this
AGREEMENT and to consummate the transactions contemplated hereby.

6.2. Consideration Shares

All CONSIDERATION SHARES will be, when issued in accordance with this AGREEMENT,
duly authorized, validly issued, fully paid and nonassessable.

6.3. Capitalization

6.3.1. As of the date of this AGREEMENT, the authorized capital stock of ENTRUST
consists of (a) 15'000'000 shares of Series A Common Stock, USD .01 par value
per share, of which approximately 5'078'010 shares are issued and outstanding,
(b) 260'000 shares

-20-
<PAGE>

of Series B Common Stock, USD .01 par value per share, of which 221'052 shares
are issued and outstanding, (c) 260'000 shares of Series B Non-Voting Common
Stock, of which 38'948 shares are issued and outstanding, (d) 2'500'000 shares
of Special Voting Stock, USD .01 par value per share, of which 1'925'000 shares
are issued and outstanding, and (e) 500'000 shares of Preferred Stock, USD .01
par value per share, none of which shares are issued or outstanding. ENTRUST's
Series A Common Stock. 6.3.2. In addition to the issued stock of ENTRUST, as of
the date of this AGREEMENT, ENTRUST has reserved 1'857'230 shares of Series A
Common Stock for issuance pursuant to the 1996 Stock Incentive Plan. ENTRUST
anticipates reserving additional Series A Common Stock for issuance pursuant to
the 1996 Stock Incentive Plan or similar plan.

6.3.3. The capital stock table of ENTRUST attached hereto as Exhibit CAP shows
the approximate fully diluted capital structure of ENTRUST at CLOSING.

6.3.4. As a holder of CONSIDERATION SHARES, the SELLER shall have the same
rights, preferences and privileges as the other holders of ENTRUST's Series A
Common Stock.

6.4. Governmental Consents

No consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any US GOVERNMENTAL AUTHORITY is
required on the part of ENTRUST in connection with the execution and delivery of
this AGREEMENT, the offer, issuance, sale and delivery of the CONSIDERATION
SHARES, or the other transactions to be consummated at the CLOSING, as
contemplated by this AGREEMENT.

6.5. Warranty Claims Against Entrust

6.5.1. Warranty claims in connection with a breach of the representations of
ENTRUST made under Sec. 6.1 to 6.3 are subject to the following limitations:

(b) If the conditions for the exercise of PUT RIGHT pursuant to Sec. 2.4.1. are
fulfilled, any warranty claim shall be excluded altogether.

6.5.2. If the breach of Sec. 6.4.3 impairs the enforceability of the PUT RIGHT
of Sec. 2.4.1. and 2.4.3, the claim shall be capped at 58.30 per CONSIDERATION
SHARE. 6.5.3. Without prejudice to the foregoing, Warranty Claims shall be
subject to a time-bar of 24 months following CLOSING.

-21-
<PAGE>

7. Covenants

7.1. Management of the Company

(a) cause the business of the COMPANY to be conducted in any manner
inconsistent with the ordinary and usual course of the COMPANY's business;

(c) cause the COMPANY to terminate any of the employment agreements with any
person employed by the COMPANY at the date of this AGREEMENT or to transfer
the title to any of the INTELLECTUAL PROPERTY listed in Exhibit IPR;

(d) take any other action which is inconsistent with the provisions of this
AGREEMENT; or

(e) cause the COMPANY to sell any COMPANY SHARES held in treasury, or to issue
any new COMPANY SHARE or options, or to take any action which would change
the situation with respect to the COMPANY SHARES and, generally, the
COMPANY's capital, as represented in Sec.4.2.

7.2. Product Liability

7.2.1. The SELLER undertakes to hold the COMPANY free of any harm caused by
warranty claims in connection with defects affecting the products of the COMPANY
existing at CLOSING, provided, however, that ENTRUST cannot call upon this
covenant in connection with any product of the COMPANY if (i) ENTRUST or the
COMPANY fails to show reasonable care in maintaining such product or in
responding to customers' requests with respect to such product, or (ii) if
ENTRUST or the COMPANY made any modification to such product. The claim of
ENTRUST may only be raised if the warranty claims against the COMPANY exceed in
aggregate an amount of CHF 250'000, and if such claims are notified to the
COMPANY within 12 months following CLOSING.

-22-
<PAGE>

The claim of ENTRUST against the SELLER shall be limited to [ ] % of the excess
of the aggregate warranty claims raised against the COMPANY over CHF 250'000.--.

7.2.2. The claim of ENTRUST against the SELLER pursuant to this Sec. 7.2 is
subject to and shall be covered by the cap of Sec. 5.6.

7.3. Consideration Shares

7.3.1. The SELLER acknowledges that for a period of one year following the
CLOSING (the "DISTRIBUTION COMPLIANCE PERIOD"), the SELLER shall not (a) engage
in any activity for the purpose of, or which may reasonably be expected to have
the effect of, conditioning the market in the United States for the
CONSIDERATION SHARES or (b) unless such CONSIDERATION SHARES are registered
under the SECURITIES ACT or an exemption from the registration requirements of
the SECURITIES ACT is available, offer, sell or transfer the CONSIDERATION
SHARES in the United States or to, or for the account or benefit of, a U.S.
person. The SELLER understands that the CONSIDERATION SHARES or any interest
therein are only transferable on the books and records of the transfer agent and
registrar of ENTRUST. The SELLER further understands that neither ENTRUST nor
its transfer agent and registrar will register any transfer of the CONSIDERATION
SHARES except in accordance with the provisions of REGULATION S, pursuant to
registration under the SECURITIES ACT or pursuant to an available exemption from
registration, and that ENTRUST may place stop transfer orders with its transfer
agent with respect to certificates representing CONSIDERATION SHARES.

(a) written certification that neither record nor beneficial ownership of the
CONSIDERATION SHARES has been offered or sold in the United States or to,
or for the account or benefit of, any U.S. person;

(b) a written certification of the proposed transferee that such transferee (or
any account for which such transferee is acquiring such CONSIDERATION
SHARES) is not a U.S. person, that such transferee is acquiring such
CONSIDERATION SHARES for such transferee's own account (or an account over
which he or she has investment discretion) and that such transferee is
knowledgeable of and agrees to be bound by the restrictions on re-sale set
forth in this Agreement and REGULATION S during the DISTRIBUTION COMPLIANCE
PERIOD, and

(c) a written opinion of United States counsel, in form and substance
reasonably satisfactory to ENTRUST, to the effect that the offer, sale and
transfer of such

-23-
<PAGE>

CONSIDERATION SHARES are exempt from registration under the SECURITIES ACT.
Any CONSIDERATION SHARES offered, sold or transferred during the
DISTRIBUTION COMPLIANCE PERIOD in accordance with the foregoing
restrictions will continue to be deemed "restricted securities" under Rule
144 of the SECURITIES ACT, notwithstanding that they were acquired in a
resale transaction made pursuant to Rules 901 or 904 of REGULATION S.

7.3.3. Rule 144. The SELLER understands that "restricted securities" may be
resold in the United States or to, or for the benefit of, U.S. persons in
accordance with Rule 144 of the SECURITIES ACT. The SELLER acknowledges that the
following is a summary of the resale requirements of Rule 144, and such summary
is qualified in its entirety by reference to such rule, a copy of which was
previously provided to the SELLER.

7.3.4. Rule 144, as currently in effect, imposes the following requirements on
any holder of restricted securities:

(a) at the time of resale, ENTRUST must have been a public company for at least
90 days (i.e., ENTRUST must have securities registered pursuant to Section
12 of the United States Securities Exchange Act of 1934, as amended, and
have filed all reports required to be field thereunder during the 12 months
preceding the sale (or for such shorter period as ENTRUST is a public
company);

(b) the holder of restricted securities must have held such securities for at
least one year;

(c) the number of shares of Series A Common Stock sold by the holder within any
three-month period may not exceed the greater of (a) 1% of the number of
outstanding shares of Series A Common Stock or (b) the average weekly
trading volume of the Series A Common Stock during the four calendar weeks
preceding the filing of the Form 144;

(e) the holder must mail three copies of a Form 144 to the United States
Securities and Exchange Commission at the same time as he or she places the
sale order with the broker.

-24-
<PAGE>

restrictive legend from the CONSIDERATION SHARES under Rule 144(k). Thereafter,
and in respect of the transfers made in accordance with Rule 144, the holder
need not comply with the restrictions on resale noted above.

7.3.6. A legend substantially in the following form will be placed on the
certificates representing the CONSIDERATION SHARES which may be issued to the
SELLER. "The shares represented by this certificate have not been registered
under the United States Securities Act of 1933, as amended, and may not be
offered, sold or otherwise transferred, pledged or hypothecated (i) unless and
until such shares are registered under such Act or an opinion of counsel
satisfactory to Entrust Technologies Inc. is obtained to the effect that such
registration is not required or (ii) except in accordance with Regulation S of
such Act. Hedging transactions involving the shares represented by this
certificate may not be conducted except in compliance with the Securities Act of
1933, as amended.

(a) such agreement shall only apply to the first REGISTRATION STATEMENT
covering Series A Common Stock or other securities to be sold to the public
in an underwritten offering, and

(b) all stockholders of ENTRUST holding not less than the number of shares of
Series A Common Stock held by the SELLER and all officers and directors of
ENTRUST enter into similar agreements.

7.4. Watermark Business

-25-
<PAGE>

any claims arising from or relating to the Watermark intellectual property,
either before or after CLOSING. To the extent that the COMPANY is under any
obligation to perform any work on behalf of the WATERMARK COMPANY or in
connection with the Watermark intellectual property, such obligation will be
taken over by the WATERMARK COMPANY at no cost for the COMPANY. If such transfer
is not possible, the WATERMARK COMPANY will pay an arm's length consideration to
the COMPANY and grant to the COMPANY at no charge all licenses necessary for the
performance of such work.

8. Miscellaneous

8.1. Costs

8.1.1. Each Party shall bear its own costs, taxes and expenses relating to the
preparation, CLOSING and implementation of this AGREEMENT.

8.2. Confidentiality

Effective as of CLOSING, ENTRUSTS' obligation to the keep confidential the
information received on the COMPANY shall terminate.

8.3. Assignment

8.3.2. In case of such an assignment of the contract by ENTRUST to any of its
affiliates pursuant Sec. 8.3.1, a letter of comfort or a guarantee of ENTRUST
shall be delivered to the SELLERS.

8.4. Announcements

-26-
<PAGE>

8.5. Notices

(a) ENTRUST: General Counsel, Entrust Technologies Inc. 2323 North Central
Expressway, Richardson, Texas, 75080, phone: 001 972 994 8020, fax 001 972
994 8005

(b) SELLER: [Name], [Address]

8.5.3. Each such notice or other communication shall be effective:

(a) if given by facsimile when the facsimile is transmitted to the facsimile
number specified in para. 8.5.1 or

(b) if given by any other means, when received at the address specified in
para. 8.5.1.

8.6. Severability

8.7. Construction, amendments

8.7.2. This AGREEMENT may not be amended except in writing, including
communications by letter, facsimile, or E-mail.

-27-
<PAGE>

8.7.3. The PARTIES agree that the AGREEMENT shall not be construed against any
PARTY on the ground that such PARTY drafted or prepared the AGREEMENT.

8.8. Governing law

This AGREEMENT shall be governed by the internal law of Switzerland; the
application of the Vienna (United Nations) Convention on Contracts for the
International Sale of Goods is excluded.

8.9. Arbitration

All disputes arising out of or in connection with the present agreement,
including disputes on its conclusion, binding effect, amendment and termination
shall be resolved, to the exclusion of the ordinary courts by a three-person
Arbitral Tribunal in accordance with the International Arbitration Rules of the
Zurich Chamber of Commerce. The language of the arbitration shall be English.

List of Exhibits

- - Exhibit DIL (List of Documents submitted to Entrust)

- - Exhibit CAP (Capital Structure of Entrust)

- - Exhibit IPR (Intellectual Property)

_________________ , this ___________ _________________ , this __________

ENTRUST Technologies Inc. The SELLER:

- ---------------------------------- ----------------------------------
Name: [Name]

Title:

-28-
<PAGE>

This Form of Share Purchase Agreement (or comparable form) was entered into
by the shareholders of R3 Security Engineering AG listed below. The only
material differences in the Share Purchase Agreements relate to the
consideration paid to such shareholders, which is set forth after their
respective names.

Price
Consideration Escrow Adjusted
Shareholder U.S. Dollars Shares Shares Shares
- ----------- ------------ ------ ------ ------
Andreas E. Strate $52,573 16,062 3,276 1,073
Claus N. Rasmussen 5,286 1,606 327 107
Bruno Wildhaber 157,747 14,258 2,735 1,073
Jurgen Golz 3,960 357 68 26
Xuejia Lai 26,316 8,031 1,638 536
Fritz Bauspiess 2,614 804 164 53
Wilhelm Niehoff 5,286 1,606 513 107

-29-
<PAGE>

ENTRUST TECHNOLOGIES

[Name]
[Address]

CONSIDERATION SHARES

Dear [___________]

Reference is made to the share purchase agreement between yourself and ourselves
for the purchase of shares in R3 Security Engineering AG closed on 8 June 1998
(the "Share Purchase Agreement").

The purpose of this letter is the amendment of the Share Purchase Agreement with
respect to its Section 7.3 as follows:

Rule 144 Reporting Requirements

a) comply with all rules and regulations of the Commission applicable in
connection with use of the Resale Rules;

b) make and keep adequate and current public information available, as
those terms are understood and defined in the Resale Rules, at all
times;

c) file with the Commission in a timely manner all reports and other
documents required of ENTRUST under the Securities Act and Exchange
Act;

Act, and (iii) such other information as may be reasonably requested
in availing the SELLER of any rule or regulation of the Commission
which permits the selling of any such CONSIDERATION SHARES without
registration; and

Rule 144A Information

Sec. 7.3.7

The legend to be placed on the certificates representing CONSIDERATION SHARES
shall include the following additional transfer exception:

or (iii) except to a "qualified institutional buyer" (as defined in Rule 144A
promulgated under the Securities Act) in a transaction which meets the
requirements of such Rule 144A.

Zurich, 8 June 1998

Entrust Technologies Inc.

/s/ Brad Ross
- -------------
Brad Ross
<PAGE>

ENTRUST TECHNOLOGIES

[Name]
[Address]

Watermark spin-off

Dear [____________]

Pursuant to the information received from Dr. Markus Kroll on 6 June 1998, the
tax authorities decided to levy against R3 Security Engineering AG a withholding
tax of CHF 177,697 in connection with the distribution of the shares in
Securights AG as a dividend. Since such taxes are to be borne pro rata by the
Sellers, we will in due course, send you an invoice for your portion of the
taxes, as determined in Sec. 7.4.2. of the Share Purchase Agreement. Indeed, you
may be entitled, to claim back this amount from the tax authorities in
accordance with the tax legislation.

We thank you for your comprehension.

Zurich, 8 June 1998

Entrust Technologies, Inc.

/s/ Brad Ross
- -------------
Brad Ross

<PAGE>

1
Exhibit 4.1

Number SHARES
PAR VALUE
$.01 PER SHARE

[LOGO]

Orchestrating Enterprise Security

INCORPORATED UNDER THE LAWS CUSIP 293848 10 7
OF THE STATE OF MARYLAND

THIS CERTIFICATE IS SEE REVERSE FOR
TRANSFERABLE IN DENVER, CO CERTAIN DEFINITIONS

THIS CERTIFIES THAT ____________________________________________ is the owner of
________________________________________________________________________________

FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF

Entrust Technologies Inc. transferrable on the books of the Corporation by the
holder hereof in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This Certificate and the shares represented
hereby are issued and shall be subject to all of the provisions of the Articles
of Incorporation and By-Laws of the Corporation, each as from time to time
amended (copies of which are on file with the Transfer Agent and Registrar), to
all of which the holder by acceptance hereof assents. This Certificate is not
valid until countersigned and registered by the Transfer Agent and Registrar.

Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.

Dated:_________________

/s/ James D. Kendry [CORPORATE /s/ John A. Ryan
Secretary SEAL] PRESIDENT AND CHIEF EXECUTIVE
OFFICER

COUNTERSIGNED AND REGISTERED:
AMERICAN SECURITIES TRANSFER &
TRUST, INC.
P.O. Box 1596,
Denver, Colorado 80201

BY___________________________

TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE>

2
Entrust Technologies Inc.

The Corporation has authority to issue stock of more than one class. The
Corporation will furnish without charge to each Stockholder who so requests a
full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the stock of each
class which the Corporation is authorized to issue.

The Corporation has authority to issue a preferred or special class of
stock in series. The Corporation will furnish without charge to each
Stockholder who so requests a full statement of the differences in the relative
rights and preferences between the shares of each series to the extent they have
been set, and the authority of the board of directors to set the relative rights
and preferences of subsequent series.

The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - _________ Custodian________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act__________________________
in common (State)
</TABLE>

Additional abbreviations may also be used though not in the above list.

For value received, __________________________________, hereby sell,
assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING ZIP CODE, OF ASSIGNEE)

_________________________________________________________________________

_______________________________________________________________________ Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

_____________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated _____________________ ________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.

Signature(s) Guaranteed:____________________________________________________
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS,
SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.

<PAGE>

Exhibit 5

July 24, 1998

Entrust Technologies Inc.
2323 North Central Expressway
Richardson, Texas 75080

Re: Registration Statement on Form S-1
----------------------------------

Ladies and Gentlemen:

This opinion is furnished to you in connection with a Registration
Statement on Form S-1 (File No. 333-57275) (the "Registration Statement") filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of shares of Common Stock, $.01 par value per share (the "Shares"), of Entrust
Technologies Inc., a Maryland corporation (the "Company"), with an aggregate
offering price of $130,026,672 of which (i) up to 5,400,000 Shares will be
issued and sold by the Company and (ii) the remaining 2,726,667 Shares will be
sold by certain stockholders of the Company (the "Selling Stockholders")
(including 1,060,000 Shares issuable upon exercise of an over-allotment option
granted by the Selling Stockholders).

The Shares are to be sold by the Company and the Selling Stockholders
pursuant to U.S. and international underwriting agreements (the "Underwriting
Agreements") to be entered into by and among the Company, the Selling
Stockholders and Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities
Corporation, NationsBanc Montgomery Securities LLC and Warburg Dillon Read LLC,
and their respective foreign affiliates, as representatives of the several
underwriters named in the Underwriting Agreements, the forms of which have been
filed as Exhibits 1.1 and 1.2 to the Registration Statement.

We are acting as counsel for the Company in connection with the sale by the
Company and the Selling Stockholders of the Shares. We have examined signed
copies of the Registration Statement as filed with the Commission. We have also
examined and relied upon the Underwriting Agreements, minutes of meetings of the
stockholders and the Board of Directors of the Company as provided to us by the
Company, stock record books of the Company as provided to us by the Company, the
Articles of Incorporation and Bylaws of the Company, each as restated and/or
amended to date, and such other documents as we have deemed necessary for
purposes of rendering the opinions hereinafter set forth.
<PAGE>

Entrust Technologies Inc.
July 24, 1998
Page 2

In our examination of the foregoing documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as copies, the authenticity of the originals of such latter documents and the
legal competence of all signatories to such documents.

Our opinion in clause (ii) below, insofar as it relates to the Selling
Stockholders' Shares being fully paid, is based solely on a certificate of the
Senior Vice President, Business Development and Finance and Chief Financial
Officer of the Company.

We assume that the appropriate action will be taken, prior to the offer and
sale of the Shares in accordance with the Underwriting Agreements, to register
and qualify the Shares for sale under all applicable state securities or "blue
sky" laws.

We express no opinion herein as to the laws of any state or jurisdiction
other than the state laws of the Commonwealth of Massachusetts and the federal
laws of the United States of America. To the extent that any other laws govern
the matters as to which we are opining herein, we have assumed that such laws
are identical to the state laws of the Commonwealth of Massachusetts, and we are
expressing no opinion herein as to whether such assumption is reasonable or
correct.

Based upon and subject to the foregoing, we are of the opinion that (i) the
Shares to be issued and sold by the Company have been duly authorized for
issuance and, when such Shares are issued and paid for in accordance with the
terms and conditions of the Underwriting Agreements, such Shares will be validly
issued, fully paid and nonassessable and (ii) the Shares to be sold by the
Selling Stockholders have been duly authorized and are validly issued, fully
paid and nonassessable.

It is understood that this opinion is to be used only in connection with
the offer and sale of the Shares while the Registration Statement is in effect.

Please note that we are opining only as to the matters expressly set forth
herein, and no opinion should be inferred as to any other matters. This opinion
is based upon currently existing statutes, rules, regulations and judicial
decisions, and we disclaim any obligation to advise you of any change in any of
these sources of law or subsequent legal or factual developments which might
affect any matters or opinions set forth herein.
<PAGE>

Entrust Technologies Inc.
July 24, 1998
Page 3

We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act and to the use of our
name therein and in the related Prospectus under the caption "Legal Matters."
In giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act or the
rules and regulations of the Commission.

Very truly yours,

/s/ HALE AND DORR LLP

<PAGE>

Exhibit 10.5

STRATEGIC ALLIANCE AGREEMENT
----------------------------

THIS STRATEGIC ALLIANCE AGREEMENT (this "Agreement") is made as of 31 December,
---------
1996, between NORTHERN TELECOM LIMITED, a Canadian corporation ("NTL"), and
---
ENTRUST TECHNOLOGIES INC., a Maryland corporation ("ETI").
---

WHEREAS, pursuant to an asset transfer agreement between NTL and Entrust
Technologies Limited of even date (the "NTL Transfer Agreement") and an asset
----------------------
transfer agreement between Northern Telecom Inc. and ETI of even date, the
Entrust Technology (as defined herein) has been transferred to ETI and ETI's
Canadian subsidiary, Entrust Technologies Limited; and

WHEREAS, NTL desires to license from Entrust on behalf of itself and the Nortel
Subsidiaries (as defined herein) ongoing rights to the Entrust Technology, ETI
desires to license from NTL on behalf of itself and its Subsidiaries some
intellectual property rights associated with the Entrust Technology, and NTL and
ETI desire to cooperate regarding contracting, patent cross-licensing and the
exchange of information, all on the terms and subject to the conditions set
forth herein;

NOW THEREFORE, NTL and ETI, intending to be legally bound agree as follows:

ARTICLE I
DEFINITIONS
-----------

Capitalized terms used in this Agreement are used as defined in this Article I
or elsewhere in this Agreement. As used herein:

"Agreement" has the meaning specified in the preamble hereof.
---------

"Confidential Information" has the meaning specified in Section 8.02.
------------------------

"Entrust" shall mean ETI and all Subsidiaries thereof.
-------

"Entrust Entity" shall mean either ETI or the applicable Entrust Subsidiary, as
--------------
the context requires.

"ETI" has the meaning specified in the preamble hereof.
---

"Effective Date" means the close of business on the date specified in the
--------------
preamble hereof.

"Enterprise License" has the meaning specified in Section 3.01.
------------------

1
<PAGE>

"Entrust Patents" shall mean all Patents: (i) which are owned or controlled at
---------------
any time during the Patent License Term by Entrust or any Entrust Subsidiary; or
(ii) with respect to which, and to the extent to which, Entrust or any Entrust
Subsidiary shall at any time during the Patent License Term have the right to
grant the licenses and rights which are granted herein by Entrust. The Entrust
Patents as of the Effective Date are set forth in Exhibit A of the NTL Transfer
Agreement.

"Entrust Products" has the meaning specified in the NTL Transfer Agreement.
----------------

"Entrust Technology" has the meaning specified in the NTL Transfer Agreement.
------------------

"Field of Activity" shall mean , in respect of each Party, the products and
-----------------
services forming the business, at the Effective Date, of that Party or any of
its Subsidiaries, including new products and services which normally evolve from
such products and services.

"Grantee" shall mean either Entrust or Nortel, as the case may be, to which
-------
licenses are granted under the Patent License.

"Grantor" shall mean the Party granting licenses under the Patent License, as
-------
well as its Subsidiaries on behalf of which such licenses are granted.

"Licensed Products" shall mean, in respect of each Party, any products which are
-----------------
within its Field of Activity.

"Licensed Services" shall mean, in respect of each Party, any services which are
-----------------
within its Field of Activity.

"NTL" has the meaning specified in the preamble hereof.
---

"NTL Technology" has the meaning specified in Section 2.01 hereof.
--------------

"Nortel" shall mean NTL and all Nortel Subsidiaries.
------

"Nortel Entity" shall mean either NTL or the applicable Nortel Subsidiary, as
-------------
the context requires.

"Nortel Patents" shall mean all Patents other than Patents included in NTL
--------------
Technology: (i) which are owned or controlled at any time during the Patent
License Term by Nortel or any Nortel Subsidiary; or (ii) with respect to which,
and to the extent to which, Nortel or any Nortel Subsidiary shall at any time
during the Patent License Term have the right to grant the licenses and rights
which are herein granted by Nortel including through cross licenses or
otherwise.

"Nortel Subsidiary" shall mean a Subsidiary of Nortel, excluding ETI and Entrust
-----------------
Technologies Limited.

2
<PAGE>

"Patent" shall mean any patent (other than a design patent or a design
------
registration) and any utility model covering any invention for which a first
application was filed in or for any country prior to the termination of the
Patent License Term, and shall include any such application in or for a country
for which rights under the law of the country are available for compensation for
unauthorized use of the invention covered by such application.

"Party" shall mean either NTL or the ETI, as the context requires except with
-----
respect to Article VIII where "Party" shall refer either to Nortel or Entrust,
as the context requires.

"Patent License" has the meaning specified in Section 6.03.
--------------

"Patent License Term" shall mean that period of time that ETI is a Subsidiary of
-------------------
NTL.

"Reseller Agreement" has the meaning specified in Section 4.01.
------------------

"Source Code License" has the meaning specified in Section 5.01.
-------------------

"Subsidiary" shall mean: (i) a corporation, company or other entity, in which a
----------
Party now or hereafter, owns or controls, directly or indirectly, fifty percent
(50%) or more of the outstanding shares or securities (representing the right to
vote for the election of directors or other managing authority), provided,
however, that such corporation, company, or other entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists; or (ii) an entity
which does not have outstanding shares or securities, as may be the case in a
partnership, joint venture or unincorporated association, but in which a Party
now or hereafter, owns or controls, directly or indirectly, fifty percent (50%)
or more of the ownership interest representing the right to make the decisions
for such entity, provided, however, that such entity shall be deemed to be a
Subsidiary only so long as such ownership or control exists.

ARTICLE II
NTL TECHNOLOGY
--------------

Section 2.01 NTL Technology. Entrust shall be entitled to the benefit of the NTL
--------------
intellectual property licenses specified in Exhibit A (the "NTL Technology") for
--------------
so long as NTL effectively owns or controls more than fifty percent (50%) of the
voting stock or interests in ETI.

Section 2.02. NTL Obligations. NTL has, to the best of its knowledge, complied
----------------
in all material respects with the provisions of the licenses for NTL Technology.
NTL

3
<PAGE>

shall make all reasonable efforts to perform in all material respects the
obligations required to maintain the licenses for the NTL Technology in good
standing for their respective terms. NTL shall not make any material change to
the licenses for Nortel Technology without the consent of ETI, which shall not
be unreasonably withheld. NTL shall make commercially reasonable efforts to
acquire for the benefit of Entrust any renewal or extension of NTL a license for
Nortel Technology at Entrust's request provided Entrust agrees to pay all costs
associated with obtaining such benefit for Entrust. If NTL renews or extends a
license for NTL Technology, NTL may, but shall not be required to obtain rights
thereunder for the renewal period or extension provisions for the benefit of
Entrust.

Section 2.03. ETI Obligations. Entrust shall comply in all material respects
----------------
with the obligations required of it under the licenses for the NTL Technology
for so long as Entrust benefits from those licenses. ETI shall pay to NTL the
portion of all fees and charges paid by Nortel to obtain continuing rights to
the NTL Technology that are reasonably attributable to Entrust's actual use of
the NTL Technology.

ARTICLE III
NORTEL USE OF ENTRUST PRODUCTS
------------------------------

Section 3.01 Right to Use. ETI, on behalf of Entrust, grants to NTL and its
------------
Affiliates (as defined in the Enterprise License) a non-exclusive, fully paid-
up, worldwide, perpetual license to use an unlimited number of copies of the
Entrust Products subject to the terms and conditions of an agreement to be
concluded between NTL and ETI promptly after the Effective Date in substantially
the form of the license set forth in Exhibit B (the "Enterprise License") save
------------------
as amended to comply with the provisions of this Article III. NTL represents as
of the Effective Date that the terms of the Enterprise License are materially
similar to the terms of an existing agreement with a third-party licensee of the
Entrust Products, except for the terms relating to price and the provisions of
Section 3.02 hereof

Section 3.02 Support. NTL may contract for support services under the
-------
Enterprise License. Payments to Entrust for the support services identified in
the Enterprise License as of the Effective Date shall be three hundred thousand
U.S. dollars (U.S. $300,000.00) for the calendar year 1997 and shall not
increase by more than inflation as measured by the Canadian CPI for any one-year
renewal period.

Section 3.03 Indemnification. Notwithstanding any provision of the Enterprise
-----------------
License:

(a) ETI shall not be required to honour any product warranty or intellectual
property indemnity set forth in the Enterprise License, to the extent that
such breach of warranty or indemnity relates to a defect in any of the
Entrust Products as of the Effective Date or the infringement or
misappropriation of any third party rights as incorporated into the Entrust
Products as of the Effective Date.

4
<PAGE>

(b) ETI's liability to Nortel arising from or relating to the intellectual
property indemnity set forth in the Enterprise License shall not exceed 50%
(fifty percent) of the monies paid by Nortel thereunder to a maximum of
U.S.$1,000,000 (one million U.S. dollars).

ARTICLE IV
NORTEL RESALE OF ENTRUST PRODUCTS
---------------------------------

Section 4.01 Reseller Rights. At NTL's option and upon NTL's request, Entrust
---------------
shall promptly enter into a non-exclusive reseller agreement with NTL, on behalf
of Nortel, in substantially the form set forth in Exhibit C (the "Reseller
--------
Agreement") save as amended to comply with the provisions of this Article IV.
- ---------
NTL represents as of the Effective Date that the terms of the Reseller Agreement
are materially similar to the terms of an agreement recently concluded with a
third-party reseller of the Entrust Products, except for the provisions of
Section 4.02 hereof. Subject to early termination for material default, such
Reseller Agreement shall expire either in three years or when ETI ceases to be a
Subsidiary of NTL, whichever event occurs later.

Section 4.02 Most Favoured Treatment. During the life of the Reseller Agreement,
-----------------------
it is the intention of ETI that the terms of the Reseller Agreement shall be no
less favourable to Nortel than the terms in effect with any of Entrust's
resellers of Entrust Products at the time the Reseller Agreement is executed.

Section 4.03 Indemnification. Notwithstanding any provision of the Reseller
----------------
Agreement, ETI shall not be required to honour intellectual property indemnity
set forth in the Reseller Agreement, to the extent that such breach of
representation, warranty, condition or indemnity relates to a defect in any of
the Entrust Products as of the Effective Date or the infringement or
misappropriation of any third party rights incorporated into the Entrust
Products as of the Effective Date.

ARTICLE V
NORTEL RIGHTS FOR ENTRUST PRODUCT SOURCE CODE
---------------------------------------------

Section 5.01 Source Code Access. At NTL's option and upon NTL's request, Entrust
------------------
shall promptly enter into a non-exclusive Entrust Products source code license
with NTL, on behalf of Nortel, in substantially the form set forth in Exhibit D
(the "Source Code License"). NTL represents as of the Effective Date that the
-------------------
terms of the Source Code License are materially similar to the terms of an
agreement recently concluded with a third-party licensee of the source code for
the Entrust Products, except that NTL is not required to pay any lump sum
royalty and for the provisions of Section 5.02 hereof.

5
<PAGE>

Section 5.02 Most Favoured Treatment. For so long as ETI remains a Subsidiary
-----------------------
of NTL, it is the intention of ETI that the terms of the Source Code License be
no less favourable to Nortel than the terms then in effect with any of Entrust's
source code licensees that receives substantially similar rights taking into
account the relative size of the licensee and Entrust's potential benefits.

Section 5.03 Indemnification. Notwithstanding any provision of the Source Code
-----------------
License, ETI shall not be required to honour any product warranty or
intellectual property indemnity set forth in the Source Code License, to the
extent that such breach of warranty or indemnity relates to a defect in any of
the Entrust Products as of the Effective Date or the infringement or
misappropriation of any third party rights incorporated into the Entrust
Products as of the Effective Date.

ARTICLE VI
PATENT CROSS LICENSING
----------------------

Section 6.01. ETI Benefit from Cross Licenses. Subject to the terms and
--------------------------------
conditions of this Agreement, NTL, to the extent of its legal right to do so,
hereby grants to Entrust under the Nortel Patents, a non-transferable, non-
assignable, indivisible, non-exclusive, royalty-free, worldwide license for
Licensed Products and Licensed Services.

Section 6.02. Nortel Benefit from Cross Licenses. Subject to the terms and
-----------------------------------
conditions of this Agreement, Entrust, to the extent of its legal right to do
so, hereby grants to Nortel, under the Entrust Patents, an irrevocable, non-
transferable, non-assignable, indivisible, non-exclusive, royalty-free,
worldwide license for Licensed Products and Licensed Services.

Section 6.03. Extent of Cross Licenses. The licenses granted pursuant to
-------------------------
Sections 6.01 and 6.02 (each such license being a "Patent License") include the
--------------
following rights:

(a) to make, use, lease, sell or otherwise dispose of, maintain and repair,
Licensed Products, to license the use of Licensed Products made by or for
Grantee, to practice any process involved in the manufacture or use of
Licensed Products, and to provide Licensed Services;

(b) to have made Licensed Products by another manufacturer for the use, lease,
sale, disposal or transfer by Grantee, but only when both of the following
conditions are met:

(i) the designs, specifications and working drawings for the manufacture
of such Licensed Products are furnished by Grantee; and

(ii) such designs, specifications and working drawings are in sufficient
detail that no additional design by the manufacturer is required other
than adaptation to the production processes and standards normally
used by the manufacturer which change the characteristics of the
products only to a negligible extent;

6
<PAGE>

(c) to make and have made, to use and have used, and to maintain machines,
tools, materials and other manufacturing instrumentalities, and to use and
have used methods and processes, insofar as such machines, tools, materials,
other manufacturing instrumentalities, methods and processes are involved in
or incidental to the development, manufacture, installation, testing,
maintenance or repair of Licensed Products, or to the training of personnel
in the use of such Licensed Products; provided, however, that the rights
granted in this Section 6.03(c) shall not serve to enlarge the scope of the
rights granted in Section 6.03(b);

Section 6.04. Limitations to Patent Licenses. Nothing contained in a Patent
--------------------------------
License shall be construed as:

(a) requiring the filing of any application for a Patent or utility model,
or the prosecution, maintenance or defense of any such application;

(b) the maintenance or defense of any Patent;

(d) a warranty or representation that any manufacture, sale, lease, use, or
importation of a Licensed Product, or the provision of any Licensed Service, by
Grantee shall be free from infringement of any intellectual property right of
Grantor other than those Patents under which and to the extent to which licenses
are in force under the Patent License;

(e) an agreement to bring or prosecute actions or suits against third
parties for infringement;

(f) an obligation to provide any manufacturing or technical information or
any support or technical assistance;

(g) conferring any right to use, in advertising, publicity or otherwise, any
name, trade name or trademark, or any contraction, abbreviation or simulation
thereof, except as expressly provided herein;

(h) conferring by implication, estoppel or otherwise upon Grantee any
license or other right under any Patent or other intellectual property right,
except the licenses and rights expressly granted herein; or

7
<PAGE>

(i) an obligation upon grantor to make any determination as to the
applicability of any Patent to any product, Licensed Product or Licensed Service
of Grantee.

Section 6.06 NTL Right to Cross-License. The licenses granted hereunder do not
---------------------------
include for the Grantee the right to grant sublicenses to any third party except
as expressly provide in Section 6.03. Notwithstanding the foregoing, NTL shall
be entitled to sublicense the Entrust Patents to meet its obligations under its
existing Patent cross license agreements. For so long as ETI is an NTL
Subsidiary, NTL shall also be entitled, as part of its continuing Patent cross
licensing program, to sublicense Entrust Patents under new Patent cross license
agreements provided that the rights granted in the Entrust Patents pursuant to
any such new Patent cross license agreements do not materially exceed those
rights customarily granted under NTL's existing Patent cross license agreements
(as of the Effective Date) and ETI obtains the benefit of all Nortel Patents
involved.

Section 6.07. Excluded Patents.
-----------------

(a) Assigned Patents. It is recognized that Grantor may have entered into or
-----------------
may hereafter enter into a contract with, or a subcontract directly for the
benefit of, a third party to undertake development work partially or
completely financed by such third party and that Grantor may be required
under such contract or subcontract (either unconditionally or by reason of
any action or inaction thereunder) to assign to such third party its rights
to grant, or may now or hereafter be restrained by such third party from
granting, licenses to Grantee under Patents arising out of such work or
covered by such contract or subcontract. The resulting inability of Grantor
to grant the licenses purported to be granted by it under such Patents shall
not be considered to be a breach of the Patent License. In such case, upon
request by the Grantee, Grantor shall make reasonable efforts to secure
rights and licenses for the Grantee from the third-party equivalent to those
provided in the Patent License.

(b) Patents Subject to Exclusive Licenses. ETI acknowledges that NTL may have
--------------------------------------
entered into exclusive license arrangements with other corporations or legal
entities. The Patent License granted hereunder by NTL does not extend the
scope of any such exclusive licenses (including any which NTL is negotiating
as of the Effective Date).

Section 6.08. Jointly Owned Patents. If the grant by Grantor of licenses and
----------------------
rights in accordance with the Patent License in respect of Patents made by its
employees jointly with third parties is subject by contract or by operation of
law to the consent of such third parties or their assignees, upon request of the
Grantee, Grantor shall use reasonable efforts to either secure rights and
licenses for the Grantee from such third-party equivalent to those provided in

8
<PAGE>

the Patent License, or obtain consent from such third parties to grant rights
and licenses equivalent to those provided in the Patent License; however, the
inability of Grantor to secure such rights or to obtain such consent in spite of
the use of reasonable efforts shall not be considered to be a breach of the
Patent License. Notwithstanding that such rights or such consent may be subject
to the payment of a royalty or other consideration to any such third party as
provided for in Section 6.09, and notwithstanding other conditions agreed with
the third party, the grant of such licenses and rights shall otherwise be in
accordance with the terms and conditions of the Patent License.

Section 6.09. Royalty Obligations. Licenses and rights, the grant of which by
--------------------
Grantor or the exercise of which by Grantee would make Grantor liable to third
parties for royalties or other payments, shall be granted only upon agreement in
writing of the Grantee to pay an appropriate portion of such royalties or make
such other payments.

Section 6.10. Patent Information. Each Party shall, upon written request from
-------------------
the other Party sufficiently identifying any Patent by country, number and date
of issuance, inform such other Party of the extent to which any such Patent is
available for licensing under the Patent License. If the license or rights
under any such Patent are restricted in scope, or are subject to payments
according to Section 6.09, a statement of the nature of any such restrictions or
payments shall, on request, be provided within a reasonable time.

Section 6.11. Duration of Cross Licenses.
---------------------------

(a) The Patent License shall commence on the Effective Date hereof (except as
provided in Section 6.12) and shall continue for the Patent License Term
unless terminated as provided in Article X or Section 6.06. Notwithstanding
the expiration of the Patent License Term, the rights and licenses granted
hereunder shall continue for the entire terms that the Entrust Patents or
the NTL Patents, as the case may be, are in force or for that part of such
terms for which the Grantor has the right to grant such rights and licenses.
Notwithstanding any other provision in this Agreement, the Patent License
shall terminate immediately upon ETI ceasing to be a Subsidiary of NTL.

(b) Subject to the other sections of this Article VI, any termination of the
licenses and rights granted to one Party and its Subsidiaries under the
Patent License shall not affect the licenses and rights granted to the other
Party and its Subsidiaries.

(c) Notwithstanding the foregoing provisions of this Section 6.11, the Patent
Licenses shall, for the patents owned or by a party, terminate as provided
for in Section 6.11(a) or ten years from the Effective Date, whichever is
later.

9
<PAGE>

Section 6.12. Changes to Subsidiaries.
------------------------

(a) New Subsidiaries. Any rights or license granted under this Article VI to a
-----------------
corporation or other legal entity which becomes a Subsidiary of a Party at a
date later than the Effective Date shall become effective as of the date
upon which such corporation or other legal entity becomes a Subsidiary of
such Party.

(b) Former Subsidiary. When a Subsidiary of either ETI or NTL ceases to be a
------------------
Subsidiary and holds any Patent under which a Grantee is licensed pursuant
to the Patent License, such Grantee shall be entitled to exercise such
rights and licenses for the full term of the Patent (or for that part of the
term that the Grantor has the right to grant such rights and licenses).
When a Subsidiary of ETI or NTL ceases to be a Subsidiary of such Party, any
license granted to such Subsidiary in or pursuant to the Patent License
shall terminate on the date that such Subsidiary ceases to be a Subsidiary.

Section 6.12. Restraint on Claims. Each Grantor undertakes not to assert any
--------------------
claim for Patent infringement with respect to use and maintenance of Licensed
Products against any end user, customer or distributor of Grantee, or any
subsequent vendee, lessee, or transferee to the extent the Licensed Products
have been acquired from Grantee after the Effective Date and are used for the
purpose for which they predominantly have been made (without modification or
amendment).

Section 6.13. Patent License Limitations. Neither Party makes any
--------------------------
representations, extends any conditions or warranties of any kind or assumes any
responsibility whatever with respect to the Patent Licenses other than the
licenses, rights and representations expressly granted in this Article VI; in
particular, unless the Parties or their Subsidiaries have expressly agreed
otherwise, neither Grantor warrants that Licensed Products made, used, sold,
disposed of, leased or licensed for use by Grantee, or Licensed Services
provided by Grantee, do not infringe Patents or other intellectual property
rights of third parties.

ARTICLE VII
COORDINATION OF CONTRACTING
---------------------------

Section 7.01 Compliance with Nortel Policies. For so long as ETI remains a
--------------------------------
Subsidiary of NTL, Entrust shall not take any action or enter into any
commitment or agreement which may reasonably be anticipated based on notice from
Nortel to result, with or without notice and with or without lapse of time or
otherwise, in a contravention or event of default by any Nortel Entity of (i)
any provisions of applicable law or regulation, (ii) any provision of NTL's
certificate of incorporation or bylaws, (iii) any credit agreement or other
material instrument binding upon Nortel, or (iv) any judgment, order or decree
of any governmental body, agency or court having jurisdiction over Nortel or any
of its assets.

10
<PAGE>

Section 7.02. Nortel Global Agreements. For so long as ETI remains a Subsidiary
------------------------
of NTL, Entrust may purchase goods and services under agreements concluded by
Nortel for the benefit of Subsidiaries of NTL. Entrust shall comply in all
material respects with the obligations required of it under such agreements for
so long as Entrust benefits from those agreements.

ARTICLE VIII
INFORMATION EXCHANGES
---------------------

Section 8.01. Information. Subject to applicable law and privileges, each Party
-----------
shall, to the extent legally permitted, provide the other Party with all
information regarding itself and transactions under this Agreement that the
other Party reasonably believes are required: (a) for the other Party to obtain
the benefits provided for herein, and (b) to comply with the provisions of
Section 7.01 and all applicable federal, state, county and local laws,
ordinances, regulations and codes, including, but not limited to, securities
laws and regulations.

Section 8.02. Confidential Information. Entrust and Nortel shall hold in trust
------------------------
and maintain confidential all Confidential Information relating to the other
Party. "Confidential Information" shall mean all information disclosed by either
------------------------
Party to the other in connection with this Agreement whether orally, visually,
in writing or in any other tangible form, and includes, but is not limited to,
technical, scientific, economic and business data, business plans, and the like,
but shall not include (i) information which becomes generally available other
than by release in violation of the provisions of this Section 8.01, (ii)
information which becomes available on a non-confidential basis to a Party from
a source other than the other Party, provided the Party in question reasonably
believes that such source is not or was not bound to hold such information
confidential, (iii) information acquired or developed independently by a Party
without violating this Section 8.02 or any other confidentiality agreement with
the other Party and (iv) information that any Party reasonably believes it is
required to disclose by law, provided that it first notifies the other Party of
such requirement and allows such Party a reasonable opportunity to seek a
protective order or other appropriate remedy to prevent such disclosure. Without
prejudice to the rights and remedies of either Party, a Party disclosing any
Confidential Information to the other Party in accordance with the provisions of
this Agreement shall be entitled to equitable relief by way of an injunction if
the other Party breaches or threatens to breach any provision of this Section
8.02.

Section 8.03. Information Exchanges. The disclosing Party makes no
----------------------
representations, does not warrant, and shall have no liability whatsoever in
respect of any information disclosed by it pursuant to this Agreement.

11
<PAGE>

ARTICLE IX
OTHER COOPERATION
-----------------

Section 9.01. Cogent. NTL acknowledges that the agreement between NTL and
--------
Nortel Limited dated 17 March 1995 as set forth in Exhibit E (the "Cogent
Agreement") shall be terminated by NTL, without liability to Entrust, except
that Entrust shall, for reasonable consideration from Nortel, make all
commercially reasonable efforts to assist Nortel to perform, in accordance with
the terms of the Cogent Agreement, any agreement made or any bid submitted
pursuant to the Cogent Agreement prior to the Effective Date.

Section 9.02. PDSO. Entrust acknowledges that NTL will be holding inventory of
-----
PDSO as of the Effective Date. Entrust shall, to the extent it requires further
PDSO equipment endeavor to acquire such equipment from NTL, subject to the
negotiation in good faith of commercially reasonable terms and condition of
supply.

ARTICLE X
TERM AND TERMINATION
--------------------

Section 10.01. Term. Except as otherwise provided in this Agreement, this
----
Agreement shall terminate on the later of (i) the third anniversary of the
Effective Date or (ii) the date on which ETI ceases to be a Subsidiary of NTL.

Section 10.02. Termination.
-----------

(a) Termination for Cause. In the event of any material breach of this
----------------------
Agreement by either Nortel or Entrust, the non-breaching Party may terminate
this Agreement by giving sixty (60) days' prior written notice to the other
Party; provided, however, that this Agreement shall not terminate if the
other Party has cured the breach prior to the expiration of such 60-day
period, or if such breach can not be cured within such sixty 60-day period,
the other Party has initiated actions to cure such breach within such sixty
60-day period, and thereafter cures such breach as soon as reasonably
practical.

(b) Termination for Insolvency. Either Party may terminate this Agreement in
--------------------------
the event the other Party: (i) admits in writing its inability to pay its
debts generally as they become due; (ii) commits an act of bankruptcy, (iii)
files a notice of intention to make a proposal under the Bankruptcy and
Insolvency Act, commences proceedings under the Companies' Creditors
Arrangement Act, or otherwise seeks a reorganization, adjustment or
composition under applicable bankruptcy laws or any other similar law or
statute of any relevant jurisdiction; (iv) enters into an assignment,
arrangement or composition for the benefit of its creditors; or (v) consents
to the appointment of a receiver or receiver-manger of itself or of the
whole or any substantial part of its property.

12
<PAGE>

Section 10.03. Effect of Termination.
---------------------

When this Agreement expires or terminates, the following provisions shall remain
in effect:

(a) NTL Technology. the provisions of Article II shall survive until they
---------------
expires in accordance with the provisions of Section 2.01 unless this
Agreement is terminated for cause pursuant to Section 10.02 arising from
breach of Article II;

(b) Enterprise License, Reseller Agreement and Source Code License. the
---------------------------------------------------------------
Enterprise License, Reseller Agreement and Source Code License shall
survive for the term provided therein subject to any right of early
termination provided therein;

(c) Patent Licenses. the provisions of Article VI shall survive until
----------------
expiration in accordance with the provisions of Article VI, unless this
Agreement is terminated for cause pursuant to Section 10.02 arising from
breach of Article VI; and

(d) Other Provisions. the provisions of Articles VIII, XI and XII shall
-----------------
survive any termination.

ARTICLE XI
LIMITS OF LIABILITY
-------------------

Section 11.01. Enterprise License, Reseller Agreement, Source Code License. The
------------------------------------------------------------
liability of either Party arising from breach of either the Enterprise License,
the Reseller Agreement or the Source Code License shall be governed exclusively
by the terms of the applicable agreement or license.

Section 11.02. No Other Obligations. Neither Party makes any representations,
--------------------
extends any conditions or warranties of any kind or assumes any responsibility
whatever except as expressly provided herein.

Section 11.03. Limitation on Types of Damages. Except for breach of Article
-------------------------------
VIII and for Article XII, in no event shall either Party be liable to the other
Party for any indirect, incidental and/or consequential damages resulting from a
breach of this agreement, including without limitation lost business, lost
savings, and lost profits even if the breaching Party has been advised of the
possibility of the occurrence of such damages. In no event shall either Party
be liable for any special or punitive damages arising from breach of this
Agreement.

Section 11.04. Monetary Limit. For any cause of action arising under this
---------------
Agreement, Nortel's liability to Entrust, and Entrust's liability to Nortel
shall not exceed U.S.$5,000,000. Notwithstanding the foregoing, each of
Nortel's and Entrust's liability to the other Party for breach of Article II
shall not exceed U.S.$10,000,000.

13
<PAGE>

ARTICLE XII
MISCELLANEOUS
-------------

Section 12.01. Notices. All notices authorized or required to be given pursuant
-------
to this Agreement shall be given in writing and either personally delivered to
the Party to whom it is given or delivered by an established delivery service by
which receipts are given or mailed by registered or certified mail, postage
prepaid, or sent by electronic telecopier, addressed to the Party at the
following addresses. Any Party may change its address for the receipt of
notices at any time by giving notice thereof to the other Party, in which event
this Agreement shall be amended accordingly.

(a) If to NTL: Northern Telecom Limited
8200 Dixie Road, Suite 100
Brampton, Ontario
L6T 5P6
Attention: Corporate Secretary

Fax No.: 905 863 8425

(b) If to ETI: Entrust Technologies Inc.
2 Constellation Court
Nepean, Ontario
K2G 5J9
Attention: President
copy: Secretary

Section 12.02. Entire Agreement. This Agreement embodies the complete Agreement
------ ---------
and understanding of Entrust and NTL with respect to the subject matter hereof.
This Agreement supersedes all prior agreements and understandings among the
Parties hereto with respect to the subject matter hereof.

Section 12.03. Modification. No change or modification of this Agreement shall
-------------
be of any force unless such change or modification is in writing and has been
signed by the duly authorized representatives of the Parties hereto.

Section 12.04. Waivers. No waiver of any breach of any of the terms of this
--------
Agreement shall be effective unless such waiver is in writing and signed by the
Party against which such waiver is claimed. No waiver of any breach shall be
deemed to be a waiver of any other or subsequent breach.

14
<PAGE>

Section 12.05. Severability. If any provision of this Agreement shall be held to
------------
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

Section 12.06. Governing Law. This Agreement shall be governed by and be
--------- ----
construed in accordance with the laws of the Province of Ontario, Canada.

Section 12.07. Waiver of Jury Trial. THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE
------ -- ---- -----
ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

Section 12.08. Limitation on Rights of Others. No person other than a Party
---------- -- ------ -- -------
shall have any legal or equitable right, remedy or claim under or in respect of
this Agreement.

Section 12.09. Assignment, etc. Each Party's rights under this Agreement are
----------------
personal to that Party and that Party shall not assign, sublet or otherwise
transfer any right or interest under this Agreement to anyone, without the prior
written consent of the other Party, which shall not be unreasonably withheld.
Subject to the foregoing, this Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of, and be enforceable by, the Parties
hereto and their respective heirs, administrators, executors, successors, and
permitted assigns.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their
authorized representatives.

NORTHERN TELECOM LIMITED ENTRUST TECHNOLOGIES INC.

By: /s/ Peter W. Currie By: /s/ John A. Ryan

Name: Peter W. Currie Name: John A. Ryan

Title: Senior Vice President and Title: President
Chief Financial Officer

By: /s/ David D. Archibald

Name: David D. Archibald

Title: Vice President and Deputy
General Counsel

<PAGE>

Exhibit 10.9

[LETTERHEAD OF ENTRUST TECHNOLOGIES APPEARS HERE]
2 Constellation Crescent,
Nepean, ON K2G 5J9

April 21, 1997

John Ryan
2912 Amesbury Dr.
Plano, TX 75093

Dear John,

On behalf of Entrust Technologies Inc. (Entrust), I am pleased to offer you
employment as President and Chief Executive Officer. As long as you remain in
this position, you will continue to be a member of the Entrust Board of
Directors (Board). The principal terms of your employment are set forth below.

Your annual base salary upon commencement of employment will be $185,000 US$ and
will be paid biweekly.

You will be eligible for an annual bonus of up to 35% of your annual base salary
as of December 31, upon achievement of 100% of Bonus Plan factors, which include
both personal and corporate performance. Payments under this Plan may consist
of cash and/or stock options, in the discretion of the Board.

You will also receive an option to purchase 361,450 shares of series A common
stock of Entrust, a number which is equal to 3% of the Entrust series A common
stock available under the 1996 Stock Incentive Plan. Details of the Stock
Incentive Plan, which will govern this option, as well as any options which may
be granted as described below, are set out in the attached documents.

At this time, Entrust has not yet adopted a benefit plan. Entrust will reimburse
you for the documented cost of health coverage for you and your eligible
dependents, which you elect to continue in accordance with the provisions of the
Consolidated Omnibus Budget Reconciliation Act (COBRA) under your present
medical election with Nortel's plan until such coverage ends or Entrust adopts a
medical plan for its employees, whichever occurs sooner.

This position is initially located at 2221 Lakeside Blvd, Richardson, Texas.
When Entrust's headquarters is established in a location which requires you to
relocate your permanent residence, you will be eligible for relocation
assistance of $100,000 to reimburse for your costs of relocation, such payment
to be made in the most tax effective manner.

You will also be eligible for reimbursement of expenses related to executive
perquisites, subject to prior Board approval, not to exceed $35,000 for the
first year of employment as President and CEO and $12,000 for each subsequent
year as President and CEO.

This offer of employment is contingent upon the following:

. formal ratification of this offer of employment by the Entrust Board of
Directors; and,

. your signing the following enclosed agreements: namely, Conflict of Interest
and Intellectual Property and Confidentiality.
<PAGE>

Page 2

We believe that your abilities and our needs are compatible and that your
acceptance of this offer will prove mutually beneficial. However, it is
understood and agreed that your employment is terminable at the will of either
party, at any time and for any reason, and is not an employment agreement for
any specified term.

This offer is valid and open for acceptance in writing for 7 business days. If
you need more time, please call me right away so we can discuss a mutually
acceptable validity period.

John, we would be delighted to have you lead our management team and look
forward to your acceptance. Please indicate your agreement by signing below and
returning a copy of this letter to my attention.

Sincerely,

/s/ David D. Archibald

David D. Archibald
Director
Entrust Technologies Inc.

copy: Entrust Board of Directors

Agreed &
Accepted by: /s/ John A. Ryan
-------------------------
April 27, 1997
-------------------------
Date

Attachments:

Conflict of Interest Agreement
Incentive Stock Option Agreement
Intellectual Property and Confidentiality Agreements
Stock Incentive Plan

<PAGE>

Exhibit 10.14

ENTRUST TECHNOLOGIES INC.

AMENDED AND RESTATED 1996 STOCK INCENTIVE PLAN
----------------------------------------------

1. Purpose
-------

The purpose of this Amended and Restated 1996 Stock Incentive Plan (the
"Plan") of Entrust Technologies Inc., a Maryland corporation (the "Company"), is
to advance the interests of the Company's stockholders by enhancing the
Company's ability to attract, retain and motivate persons who make (or are
expected to make) important contributions to the Company by providing such
persons with equity ownership opportunities and performance-based incentives and
thereby better aligning the interests of such persons with those of the
Company's stockholders. Except where the context otherwise requires, the term
"Company" shall include any present or future subsidiary corporations of Entrust
Technologies Inc. as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended, and any regulations promulgated thereunder (the "Code").

2. Eligibility
-----------

All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock, or other stock-
based awards (each, an "Award") under the Plan. Any person who has been granted
an Award under the Plan shall be deemed a "Participant."

3. Administration, Delegation
--------------------------

a. Administration by Board of Directors. The Plan will be administered
------------------------------------
by the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.

b. Delegation to Executive Officers. To the extent permitted by
--------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the
<PAGE>

power to make Awards and exercise such other powers under the Plan as the Board
may determine, provided that the Board shall fix the maximum number of shares
subject to Awards and the maximum number of shares for any one Participant to be
made by such executive officers.

c. Appointment of Committees. To the extent permitted by applicable law,
-------------------------
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). If and when the
Series A Common Stock, $.01 par value per share, of the Company (after giving
effect to the redesignation of the Company's Series A Common Stock into Common
Stock upon the filing of Articles of Amendment and Restatement, the "Common
Stock") is registered under the Securities Exchange Act of 1934 (the "Exchange
Act"), the Board shall appoint one such Committee of not less than two members,
each member of which shall be an "outside director" within the meaning of
Section 162(m) of the Code and a "non-employee director" as defined in Rule 16b-
3 promulgated under the Exchange Act. All references in the Plan to the "Board"
shall mean the Board or a Committee of the Board or the executive officer
referred to in Section 3(b) to the extent that the Board's powers or authority
under the Plan have been delegated to such Committee or executive officer.

4. Stock Available for Awards
--------------------------

a. Number of Shares. Subject to adjustment under Section 4(c), Awards
----------------
may be made under the Plan for up to 9,600,000 shares of Common Stock (after
giving effect to the four-for-one split of the Common Stock in the form of a
stock dividend declared by the Board on June 15, 1998 (the "Split")). If any
Award expires or is terminated, surrendered or canceled without having been
fully exercised or is forfeited in whole or in part or results in any Common
Stock not being issued, the unused Common Stock covered by such Award shall
again be available for the grant of Awards under the Plan, subject, however, in
the case of Incentive Stock Options (as hereinafter defined), to any limitation
required under the Code. Shares issued under the Plan may consist in whole or
in part of authorized but unissued shares or treasury shares.

b. Per-Participant Limit. Subject to adjustment under Section 4(c), for
---------------------
Awards granted after the Common Stock is registered under the Exchange Act, the
maximum number of shares with respect to which an Award may be granted to any
Participant under the Plan shall be 5,000,000 per calendar year (after giving
effect to the Split). The per-participant limit described in this Section 4(b)
shall be construed and applied consistently with Section 162(m) of the Code.

c. Adjustment to Common Stock. In the event of any stock split, stock
--------------------------
dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or

2
<PAGE>

event, or any distribution to holders of Common Stock other than a normal cash
dividend, (i) the number and class of securities available under this Plan, (ii)
the number and class of security and exercise price per share subject to each
outstanding Option, (iii) the repurchase price per security subject to each
outstanding Restricted Stock Award and (iv) the terms of each other outstanding
stock-based Award shall be appropriately adjusted by the Company (or substituted
Awards may be made, if applicable) to the extent the Board shall determine, in
good faith, that such an adjustment (or substitution) is necessary and
appropriate. If this Section 4(c) applies and Section 8(e)(i) also applies to
any event, Section 8(e)(i) shall be applicable to such event, and this Section
4(c) shall not be applicable.

5. Stock Options
-------------

a. General. The Board may grant options to purchase Common Stock (each,
-------
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive
Stock Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option."

b. Incentive Stock Options. An Option that the Board intends to be an
-----------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.

c. Exercise Price. The Board shall establish the exercise price at the
--------------
time each Option is granted and specify it in the applicable option agreement.

d. Duration of Options. Each Option shall be exercisable at such times
-------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement.

e. Exercise of Option. Options may be exercised only by delivery to the
------------------
Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.

f. Payment Upon Exercise. Common Stock purchased upon the exercise of an
----------------------
Option granted under the Plan shall be paid for as follows:

3
<PAGE>

i. in cash or by check, payable to the order of the Company;

ii. except as the Board may otherwise provide in an Option Agreement,
delivery of an irrevocable and unconditional undertaking by a creditworthy
broker to deliver promptly to the Company sufficient funds to pay the exercise
price, or delivery by the Participant to the Company of a copy of irrevocable
and unconditional instructions to a creditworthy broker to deliver promptly to
the Company cash or a check sufficient to pay the exercise price;

iii. to the extent permitted by the Board and explicitly provided in
an Option Agreement (i) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant at
least six months prior to such delivery, (ii) by delivery of a promissory note
of the Participant to the Company on terms determined by the Board, or (iii) by
payment of such other lawful consideration as the Board may determine; or

iv. any combination of the above permitted forms of payment.

6. Restricted Stock
----------------

a. Grants. The Board may grant Awards entitling recipients to acquire
------
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").

b. Terms and Conditions. The Board shall determine the terms and
--------------------
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the
Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.

4
<PAGE>

7. Other Stock-Based Awards
------------------------

The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.

8. General Provisions Applicable to Awards
---------------------------------------

a. Transferability of Awards. Except as the Board may otherwise
-------------------------
determine or provide in an Award, Awards shall not be sold, assigned,
transferred, pledged or otherwise encumbered by the person to whom they are
granted, either voluntarily or by operation of law, except by will or the laws
of descent and distribution, and, during the life of the Participant, shall be
exercisable only by the Participant. References to a Participant, to the extent
relevant in the context, shall include references to authorized transferees.

b. Documentation. Each Award under the Plan shall be evidenced by a
-------------
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.

c. Board Discretion. Except as otherwise provided by the Plan, each type
----------------
of Award may be made alone or in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board
need not treat Participants uniformly.

d. Termination of Status. The Board shall determine the effect on an
---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.

e. Acquisition Events
------------------

i. Consequences of Acquisition Events. Upon the occurrence of an
-----------------------------------
Acquisition Event (as defined below), or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall take any one or
more of the following actions with respect to then outstanding Awards: (i)
provide that outstanding Options shall be assumed, or equivalent Options shall
be substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such Options substituted for Incentive Stock Options
shall satisfy, in the determination of the Board, the requirements of Section
424(a) of the Code; (ii) upon written notice to the Participants, provide that
all then unexercised Options will

5
<PAGE>

become exercisable in full and will terminate immediately prior to the
consummation of such Acquisition Event, except to the extent exercised by the
Participants within a specified period following the date of such notice; (iii)
in the event of an Acquisition Event under the terms of which holders of Common
Stock will receive upon consummation thereof a cash payment for each share of
Common Stock surrendered pursuant to such Acquisition Event (the "Acquisition
Price"), provide that all outstanding Options shall terminate upon consummation
of the Acquisition Event and that Participants shall receive, in exchange
therefor, a cash payment equal to the amount (if any) by which (A) the
Acquisition Price multiplied by the number of shares of Common Stock subject to
such outstanding Options (whether or not then exercisable), exceeds (B) the
aggregate exercise price of such Options; (iv) provide that all Restricted Stock
Awards then outstanding shall become free of all restrictions prior to the
consummation of the Acquisition Event; and (v) provide that any other stock-
based Awards outstanding (A) shall become exercisable, realizable or vested in
full, or shall be free of all conditions or restrictions, as applicable to each
such Award, prior to the consummation of the Acquisition Event, or (B) shall be
assumed, or equivalent Awards shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof).

An "Acquisition Event" shall mean: (a) any merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving or acquiring entity)
less than 60% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (b) any sale of all or substantially all of the assets
of the Company; (c) the complete liquidation of the Company; or (d) the
acquisition of "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing 60% or more of the
combined voting power of the Company's then outstanding securities (other than
through an acquisition of securities directly from the Company) by any "person,"
as such term is used in Sections 13(d) and 14(d) of the Exchange Act other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company. Notwithstanding the foregoing, the exercise
of the Triggering event option (as defined in the Company's Articles of
Incorporation) by the holders of the Company's Series B Common Stock shall not
be deemed to be an Acquisition Event.

ii. Assumption of Options Upon Certain Events. The Board may grant
------------------------------------------
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.

6
<PAGE>

(f) Withholding. Each Participant shall pay to the Company, or make
-----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to a
Participant.

(g) Amendment of Award. The Board may amend, modify or terminate any
------------------
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.

(h) Conditions on Delivery of Stock. The Company will not be obligated to
-------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection with the issuance and delivery of such shares have been satisfied,
including any applicable securities laws and any applicable stock exchange or
stock market rules and regulations, and (iii) the Participant has executed and
delivered to the Company such representations or agreements as the Company may
consider appropriate to satisfy the requirements of any applicable laws, rules
or regulations.

(i) Acceleration. The Board may at any time provide that any Options shall
------------
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.

9. Miscellaneous
-------------

a. No Right To Employment or Other Status. No person shall have any
--------------------------------------
claim or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.

7
<PAGE>

b. No Rights As Stockholder. Subject to the provisions of the applicable
------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.

c. Effective Date and Term of Plan. The Plan shall become effective on
-------------------------------
the date on which it is adopted by the Board, but no Award granted to a
Participant designated as subject to Section 162(m) by the Board shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders. No Awards shall be
granted under the Plan after the completion of ten years from the earlier of (i)
the date on which the Plan was adopted by the Board or (ii) the date the Plan
was approved by the Company's stockholders, but Awards previously granted may
extend beyond that date.

d. Amendment of Plan. The Board may amend, suspend or terminate the Plan
-----------------
or any portion thereof at any time, provided that no Award granted to a
Participant designated as subject to Section 162(m) by the Board after the date
of such amendment shall become exercisable, realizable or vested, as applicable
to such Award (to the extent that such amendment to the Plan was required to
grant such Award to a particular Participant), unless and until such amendment
shall have been approved by the Company's stockholders.

e. Stockholder Approval. For purposes of this Plan, stockholder approval
--------------------
shall mean approval by a vote of the stockholders in accordance with the
requirements of Section 162(m) of the Code.

f. Governing Law. The provisions of the Plan and all Awards made
-------------
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Maryland, without regard to any applicable conflicts of law.

<PAGE>

EXHIBIT 10.17

ENTRUST TECHNOLOGIES INC.

1998 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------

The purpose of this Plan is to provide eligible employees of Entrust
Technologies Inc. (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par value
(the "Common Stock"). Four hundred thousand (400,000) shares of Common Stock in
the aggregate have been approved for this purpose (after giving effect to the
four-for-one split of the Common Stock in the form of a stock dividend by the
Company's Board of Directors (the "Board") on June 18, 1998).

1. Administration. The Plan will be administered by the Board or by a
--------------
Committee appointed by the Board (the "Committee"). The Board or the Committee
has authority to make rules and regulations for the administration of the Plan
and its interpretation and decisions with regard thereto shall be final and
conclusive.

2. Eligibility. Participation in the Plan will neither be permitted nor
-----------
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:

(a) they are customarily employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and

(b) they have been employed by the Company or a Designated Subsidiary
for at least three months prior to enrolling in the Plan; and

(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).

No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the
<PAGE>

employee has a contractual right to purchase shall be treated as stock owned by
the employee.

3. Offerings. The Company will make one or more offerings ("Offerings")
---------

to employees to purchase stock under this Plan. Offerings will begin on such
date or dates as may be established by the Board from time to time (the
"Offering Commencement Dates"). Each Offering Commencement Date will begin a
6-month period (a "Plan Period") during which payroll deductions will be made
and held for the purchase of Common Stock at the end of the Plan Period. The
Board or the Committee may, at its discretion, choose a different Plan Period of
twelve (12) months or less.

4. Participation. An employee eligible on the Offering Commencement Date
-------------
of any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least 14 days prior to the applicable Offering Commencement Date. The
form will authorize a regular payroll deduction from the Compensation received
by the employee during the Plan Period. Unless an employee files a new form or
withdraws from the Plan, his deductions and purchases will continue at the same
rate for future Offerings under the Plan as long as the Plan remains in effect.
The term "Compensation" means the amount of money reportable on the employee's
Federal Income Tax Withholding Statement, excluding overtime, shift premium,
incentive or bonus awards, allowances and reimbursements for expenses such as
relocation allowances for travel expenses, income or gains on the exercise of
Company stock options or stock appreciation rights, and similar items, whether
or not shown on the employee's Federal Income Tax Withholding Statement, but
including, in the case of salespersons, sales commissions to the extent
determined by the Board or the Committee.

5. Deductions. The Company will maintain payroll deduction accounts for
----------
all participating employees. With respect to any Offering made under this Plan,
an employee may authorize a payroll deduction in any dollar amount up to a
maximum of 10% of the Compensation he or she receives during the Plan Period or
such shorter period during which deductions from payroll are made.

No employee may be granted an Option which permits his rights to purchase
Common Stock under this Plan and any other employee stock purchase plan (as
defined in Section 423(b) of the Code) of the Company and its subsidiaries, to
accrue at a rate which exceeds $25,000 of the fair market value of such Common
Stock (determined at the Offering Commencement Date of the Plan Period) for each
calendar year in which the Option is outstanding at any time.

6. Deduction Changes. An employee may decrease or discontinue his
-----------------
payroll deduction once during any Plan Period, by filing a new payroll deduction

2
<PAGE>

authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).

7. Interest. Interest will not be paid on any employee accounts, except
--------
to the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.

8. Withdrawal of Funds. An employee may at any time prior to the close
-------------------
of business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.

9. Purchase of Shares. On the Offering Commencement Date of each Plan
------------------
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
reserved for the purposes of the Plan as does not exceed the number of shares
determined by dividing (a) the product of $2,083 and the number of whole months
in such Plan Period by (b) the closing price (as defined below) on the Offering
Commencement Date of such Plan Period or such other number as may be determined
by the Board prior to the Offering Commencement Date.

The purchase price for each share purchased will be 90%, or such other
percentage as may be determined by the Board consistent with the requirements of
the Code, of the fair market value of the Common Stock on (i) the first business
day of such Plan Period or (ii) the Exercise Date, whichever fair market value
shall be less. Such fair market value shall be determined by the Board of
Directors in a manner consistent with the requirements of the Code.

Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for pursuant to the formula set forth
above, but not in excess of the maximum number determined in the manner set
forth above.

3
<PAGE>

Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.

10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the Company's sole discretion) in the name
of a brokerage firm, bank or other nominee holder designated by the employee.
The Company may, in its sole discretion and in compliance with applicable laws,
authorize the use of book entry registration of shares in lieu of issuing stock
certificates.

11. Rights on Retirement, Death or Termination of Employment. In the
--------------------------------------------------------
event of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.

12. No Right To Employment or Other Status. The granting of an Option to
--------------------------------------
a person shall not be construed as giving such person the right to continued
employment or any other relationship with the Company.

13. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.

14. Rights Not Transferable. Rights under this Plan are not transferable
-----------------------
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.

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<PAGE>

15. Application of Funds. All funds received or held by the Company under
--------------------
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.

16. Adjustment in Case of Changes Affecting Common Stock. In the event of
----------------------------------------------------
a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for this Plan, the
number of shares subject to any outstanding Option and the purchase price
thereof shall be adjusted proportionately, and such other adjustment shall be
made as may be deemed equitable by the Board or the Committee. In the event of
any other change affecting the Common Stock, such adjustment shall be made as
may be deemed equitable by the Board or the Committee to give proper effect to
such event.

17. Merger. If the Company shall at any time merge or consolidate with
------
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger or consolidation, and the Board or the Committee
shall take such steps in connection with such merger or consolidation as the
Board or the Committee shall deem necessary to assure that the provisions of
Section 16 shall thereafter be applicable, as nearly as reasonably may be, in
relation to the said securities or property as to which such holder of such
Option might thereafter be entitled to receive thereunder.

In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, all outstanding Options shall be
cancelled by the Board or the Committee as of the effective date of any such
transaction, provided that notice of such cancellation shall be given to each
holder of an Option, and each holder of an Option shall have the right to
exercise such Option in full based on payroll deductions then credited to his
account as of a date determined by the Board or the Committee, which date shall
not be less than ten (10) days preceding the effective date of such transaction.

18. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.

5
<PAGE>

19. Insufficient Shares. In the event that the total number of shares of
-------------------
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.

20. Termination of the Plan. This Plan shall terminate two years after
-----------------------
the date on which the Plan was adopted by the Board or such earlier date as the
Board shall determine. Upon termination of this Plan all amounts in the
accounts of participating employees shall be promptly refunded.

21. Governmental Regulations. The Company's obligation to sell and
------------------------
deliver Common Stock under this Plan is subject to listing on a national stock
exchange or quotation on the Nasdaq National Market and the approval of all
governmental authorities required in connection with the authorization, issuance
or sale of such stock.

22. Governing Law. The Plan shall be governed by Maryland law except to
-------------
the extent that such law is preempted by federal law.

23. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company or from any other proper source.

24. Notification upon Sale of Shares. Each employee agrees, by
--------------------------------
participating in the Plan, to promptly give the Company notice of any
disposition of shares purchased under the Plan where such disposition occurs
within two years after the date of grant of the Option pursuant to which such
shares were purchased.

25. Effective Date and Approval of Stockholders. The Plan shall take
-------------------------------------------
effect upon the closing of the Company's initial public offering of Common
Stock, subject to approval by the stockholders of the Company as required by
Section 423 of the Code, which approval must occur within twelve months of the
adoption of the Plan by the Board.

Adopted by the Board of Directors
on July 21, 1998

Approved by the Stockholders
on ___________________, 1998

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Entrust Technologies
Inc. on Form S-1 of our report dated June 5, 1998, appearing in the Prospectus,
which is part of this Registration Statement. We also consent to the reference
to us under the headings "Selected Consolidated Financial Data" and "Experts"
in such Prospectus.

/s/ DELOITTE & TOUCHE
Chartered Accountants
Ottawa, Canada

July 24, 1998

<PAGE>

EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amended Registration Statement of Entrust
Technologies Inc. on Form S-1 of our report dated June 2, 1998, appearing in
the Prospectus, which is part of this Registration Statement. We also consent
to the reference to us under the heading "Experts" in such Prospectus.

Willi & Partner AG
<TABLE>
<S> <C>

/s/ Marko Willi /s/ Bruno Wust
Marko Willi Bruno Wust
Auditor in charge Auditor in charge

Wetzikon, Switzerland
July 24, 1998
</TABLE>